Accruals, Cash Flows and the Post-Earnings-Announcement Drift PDF Download

Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download Accruals, Cash Flows and the Post-Earnings-Announcement Drift PDF full book. Access full book title Accruals, Cash Flows and the Post-Earnings-Announcement Drift by Lakshmanan Shivakumar. Download full books in PDF and EPUB format.

Accruals, Cash Flows and the Post-Earnings-Announcement Drift

Accruals, Cash Flows and the Post-Earnings-Announcement Drift PDF Author: Lakshmanan Shivakumar
Publisher:
ISBN:
Category :
Languages : en
Pages : 41

Get Book Here

Book Description
Several prior studies have shown that cash flows have significantly greater impact on stock prices than accruals. We examine the implications of these findings for the post-earnings-announcement-drift anomaly. We argue that, if investors under-react to earnings news, then the larger price impact of cash flows causes the cash flow component of earnings news to predict future returns better than the accruals component. Consistent with this argument, we show that unexpected cash flows are more positively related to future returns, than are unexpected accruals. Also, unexpected cash flows are found to predict future returns above and beyond that predicted by earnings surprises. Finally, we show that a strategy that decomposes earnings news into its components significantly outperforms strategies based on earnings news alone. The results support under-reaction explanations for the drift.