Effects of institutional factors on the accruals anomaly in Latin America

Jeíce Catrine Cordeiro Moreira, Gerlando A.S.F. Lima, Alan Diógenes Góis

Research output: Contribution to journalArticle

Abstract

This paper investigates the effect of the accruals anomaly on the stock returns in Argentina, Brazil, Chile, Mexico, and Peru. We observe whether the institutional aspects of government quality and rule preference culture affect the abnormal returns from accruals. For this purpose, we applied the Mishkin test proposed by Sloan (1996). We regress the future abnormal return on accruals, size, earnings per share, and market to book for all countries, for each country, and for institutional factors (government quality and rule preference culture) in a period between 2004 and 2016. The results confirm the presence of abnormal returns in Latin American capital market, particularly in Brazil and Peru, and also in countries with low government quality and low rule preference culture. These institutional factors help to explain the accrual anomaly; therefore, investors in Brazil and Peru do not fully comprehend that greater subjectivity in accruals and make flawed pricing decisions.

Original languageEnglish (US)
Article number100269
JournalJournal of International Accounting, Auditing and Taxation
Volume36
DOIs
StatePublished - Sep 2019

Keywords

  • Abnormal returns
  • Accruals anomaly
  • Institutional factors
  • Latin America

ASJC Scopus subject areas

  • Accounting
  • Finance

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