Journal of Accounting and Economics Vol. 46 No. 1 2008

Is accruals quality a priced risk factor?

John E. Core¹; Wayne R. Guay¹; Rodrigo Verdi²

¹ University of Pennsylvania · ² MIT Sloan School of Management, 50 Memorial Drive E52-403A, Cambridge, MA 02142, USA

Abstract

In a recent and influential empirical paper, Francis, LaFond, Olsson, and Schipper (FLOS) [2005. The market pricing of accruals quality. Journal of Accounting and Economics 39, 295–327] conclude that accruals quality (AQ) is a priced risk factor. We explain that FLOS’ regressions examining a contemporaneous relation between excess returns and factor returns do not test the hypothesis that AQ is a priced risk factor. We conduct appropriate asset-pricing tests for determining whether a potential risk factor explains expected returns, and find no evidence that AQ is a priced risk factor.

DOI

10.1016/j.jacceco.2007.08.001

Volume

46

Issue

1

Pages

2-22

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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