Empirical Research On The Mispricing Of Accruals In China A-share Market

Rising in 1970s, Capital market accounting is popular among contemporary accounting researhes and attract the attention of scholars, as development from the Efficient Market Hypothesis, Capital Asset Pricing Model, drawing on economics, corporate governance, behavioral finance and other subjects, and the use of modern mathematical statistics to solve accounting problems. As an important variable in financial report, earnings empirical research has been an important research field, since Ball and Brown (1968) found that the symbol of earnings changes is significant positive with the symbol of stock abnormal returns changes, researches on the earnings forecast, earnings persistence, earnings management and earnings components of the relationship become a wide range of issues. Combination of earnings forecast and earnings persistence, with Mishkin (1983) rational expectations framework, Sloan (1996) found that accruals persistence is lower than cash flow persistence in U.S., market prices relatively high accruals company. Accordingly, Sloan (1996) constructed a hedge strategy by buying lowest-accrual decile and shorting highest-accrual decile, access to the abnormal return of 10.4%. Investing by use of accounting information available could earn abnormal return, indicating that the market mispricing of accounting accruals.The discovery of accrual mispricing means that abnormal return can be earned through the implementation of simple trading strategies based on public information available. After post-earnings announcement drift and value-glamour anomaly, accrual mispricing means that the accounting is again on the questions of the EMH. There still is a controversy between persistence perspective and investment growth perspective in academic world. The dissertation supports that the two hypotheses is a manifestation of the accrual accounting property and accrual economic attributes, combination of the two pespectives can better interpret the accrual mispricing.In China, researches of accrual mispricing are still on the primary stage, and there still is controversy. Based on this, from accounting property and the economic attributes, combined with the actual situation in China, selection of 1998-2006 A market listed shares non-financial companies data as the samples, the dissertation studys the mispricing of accrual of the issue, to explore the performance characteristics in China, and contribute to combine the two perspectives.The dissertation is divided into eight parts, the basic contents of each part as follows:Chapter 1 brings up questions, and focus on the research significance, research object, research methods and logic roads.Chapter 2 analyzes the theoretical basis, about accrual accounting theory, earnings measure theory, diminishing marginal returns, and EMH.Chapter 3 reviews the literatures on accrual mispricing. According to different theory explanations of accruals mispricing, the dissertation divides the literatue into three parts, persistence perspective, investment perspective and other theory explanations.Chapter 4 examines the existence of accrual mispricing in persistence perspective. This chapter showed that all samples of the extreme accrual decile, the average arbitrage results is significant 7.8%, profits samples of the extreme accrual decile, the average arbitrage is significant 10.5%. Using Fama-French (1993) three-factor model and the full sample and profit samples tests are robust, the arbitrage results are respectively significant 8.04% and 8.87%, verified the hypothesis.Chapter 5 examines the mispricing of abnormal accruals, and further studies how persistence perspective explains the accrual mispricing. Dividing accruals into normal accruals and abnormal accruals, results display that the average arbitrage result is 8.1% in the abnormal accrual extreme decile of whole sample, by Jones model. By modified Jones model, the extreme abnormal Accrued arbitrage decile of all samples, the average result is 8.9%, profit sample modified Jones model, the extreme abnormal accrual decile, the average arbitrage result of is 10.2%.Chapter 6 examines operating accruals mispricing, to whether investment growth can explain accrual mispricing in China. This dissertation argues that investment growth can explain the traditional industries of diminishing marginal returns, but difficult to explain all sample. In order to examine these ideas, this chapter provide market and industry two-level hypothesis. The results showed that:during sample period, the market-level short-term operating accruals strategy earns significant average abnormal returns on 7.7%; investment growth perspective has explanatory power for China's textile, clothing, fur industry, metal, non-metallic industry, machinery, equipment, instrumentation industry, power, gas and water production and supply industryof samples. For "four industry", long and short term operating accruals mispricing arbitrage results are significant 7.65% and 4.83%. In addition, this chapter establishes the interaction terms with the mixed sample of cross-sectional regression model, to examine perspectives of persistence and investment growth.Chapter 7 is robust test of the full dissertation, after eliminating the stock price synchronicity, the results of re-examination on Chapter 4, Chapter 5 and Chapter 6 verify the robustness of conclusions.Chapter 8 summarizes the conclusions and provides outlook of accrual mispricing. This chapter describes the results of examinations and conclusions, gives a few suggestions of the capital market accounting research, standards setting and other aspects, and finally point out the lack of this dissertaion and provide future research prospects.From the above study, the dissertation draws the following conclusions:1. Accrual earnings persistence is significantly lower than persistence of cash earnings, investors did not recognize. Accruals are mispricing in China, and the hedge result in profit samples is more stable than in full sample.2. Normal accrual earnings persistence is significantly lower than the cash earnings persistence, abnormal accruals earnings persistence is significantly lower than the accrual earnings persistence, indicating that earnings management may reduce the persistence of accrual earnings, investors didn't recognize, abnormal accruals are mispriced in China. Accrual mispricing is mainly from abnormal accruals mispricing in China, most likely as a result of earnings management.3. Unlike the U.S., the overall enterprise level view of the investment growth perspective can explain four industries in China. Persistence perspective and investment growth perspective can explain the "four industris" operating accruals mispricing. Conrolling profitability in period and long-term growth factors, the role of earnings management factors is more important than short-term growth factors.4. By Roll (1998) model, the dissertation found that our stock price synchronicity is still at a high level. Stock price synchronicity influences on the mispricing of accruals.