Nature Of Property Rights, Institutional Shareholdings And Accrual Anomaly

Sloan’s research was the start of the study about the accrual anomaly in the academic circles. Recently the study about the accrual anomaly is more and more detailed and thorough. Some scholars do the research about the connections between the institutional backgrounds and accrual anomaly, but in China there are a few researches considering China’s special institutional backgrounds. Consequently in this paper we try to research the connections between China’s special institutional backgrounds and accrual anomaly.One of the special institutional backgrounds in China is that there are two groups of firms in capital market, state-owned enterprises (SOE) and non-state-owned enterprises (NSOE). Although with the gradually carrying on of the economic reforms in China, the political interference of the government to the SOEs decreasing constantly, SOEs are very different from the NSOEs in many aspects. These differences can lead to the differences in their earning management behaviors, and as to many papers earning management is one of the reasons leading to the accrual anomaly, so are there any differences in the accrual anomaly between SOEs and NSOEs? In this paper we research if there are differences in the accrual anomaly for the different nature of property rights companies, and then we consider the types of the investors in the capital market. In China, some scholars think the extent of institutional investors involving in and improving the corporate governance is different in the different nature of property rights companies. The extent of institutional investors involving in and improving the corporate governance can affect the extent of earning management, which in turn affect the accrual anomaly. So we research weather there are differences between SOEs and NSOEs on the extent of the institutional investors relieving the accrual anomaly.We find that the extent of accrual anomaly is different between SOEs and NSOEs. The mispricing for accrual of SOEs is greater than NSOEs. So we can yields significantly higher abnormal returns by a hedge strategy exploiting accrual and the nature of property rights than a conventional accrual strategy. In addition, the extent of the institutional investors relieving the accrual anomaly is also different between SOEs and NSOEs. The relieving of the accrual anomaly for the NSOEs is greater than the SOEs.