The Research Of Accrual Anomaly In China's Public Companies

Accrual anomaly refers to the phenomenon which is different from the position describing in the Efficient Market Hypothesis, specifically speaking, accrual anomaly is the abnormal returns gained from portfolio strategies based on the publically disclosed accrual information. Accrual anomaly aims at the usefulness of accounting information and questions the quality of accounting standards. Accordingly, accrual anomaly makes much attention from researchers and practitioners.Both the foreign researches and the researchers in our own country have found the existing evidence of accrual anomaly and provided systematic explanations for its reasons. However, as the improvement of the whole atmosphere in the capital market, the foreign researchers have gained some experimental evidence that accrual anomaly is declining. Enlightened by that, this paper is to explore the existence of accrual anomaly in the recent years by using the latest data. Strictly following the Sloan (1996)'s classical researching framework, firstly, we tested the difference of persistence between the two components of earnings, and found that the cash flow has higher persistence and more predictive ability than accruals. Then we draw lessons from Mishkin(1983)'method which is used to test the rational expectation model in macro-economics, and found that the statistical difference between the persistence coefficient and the pricing coefficient of both the cash flow and accruals are not significant, accrual anomaly is not existed. Finally, we use a set of charts to list the each month's abnormal returns of the extreme groups in the next twelve month after the disclosure of financial statement, and observe the returns of hedge portfolio, but the computing results didn't support the existence of accrual anomaly. In order to make sure that our conclusion is conservative, we repeat the above-mentioned three steps testing process after eliminating the loss companies, but got the same results as before.According to these experimental results, our explanation is that:firstly, our samples belong to the period that is different from the prior researches and there are many significant events occurring during the sample period; secondly, in the fact that the investors is irrational and the exchange behavior is irrandom, because the cost and the risk of hedge behavior is very low, the mispricing can be corrected to a certain degree; thirdly, the unique characteristic of our stock market; fourthly, the input of hedge funds. Finally, we suggested that the future research could use more accurate measurement and suitable testing model to find the breaking point of improving the market efficiency.