دانلود رایگان مقاله انگلیسی کیفیت درآمد و رابطه ناهمگونی درآمد و بازده سهام - اشپرینگر 2018

Abstract

We adopt a heterogeneous regime switching method to examine the informativeness of accounting earnings for stock returns. We identify two distinct time-series regimes in terms of the relation between earnings and returns. In the low volatility regime (typical of bull markets), earnings are moderately informative for stock returns. But in high volatility market conditions (typical of financial crisis), earnings are strongly related to returns. Our evidence suggests that earnings are more informative to investors when uncertainty and risk is high which is consistent with the idea that during market downturns investors rely more on fundamental information about the firm. Next, we identify groups of firms that follow similar regime dynamics. We find that the importance of accounting earnings for returns in each of the market regimes varies across firms: certain firms spend more time in a regime where their earnings are highly relevant to returns, and other firms spend more time in a regime where earnings are moderately relevant to returns. We also show that firms with poorer accrual quality have a greater probability of belonging to the high volatility regime.

7 Conclusion

The degree to which accounting earnings provides useful information for stock markets is of considerable interest to businesses, investors and regulators. Accounting earnings is an important piece of information because it influences investors’ expectations about the firm’s future prospects. A number of academic studies document a decline in the usefulness of earnings for returns and suggest that increased return volatility and deterioration in the quality of the accounting system explain the decline. We add to that debate by investigating how a firm-level variation in the quality of earnings is related to both the time-series and cross-sectional variation in the earnings-returns relation. To do that, we adopt a heterogeneous regime switching methodology that allows us to model both the intertemporal and cross-sectional variation in the relation between earnings and stock returns. We show that the relation between earnings and returns in periods of boom and downturn market conditions varies across firms. Certain firms spend more time in a setting where their earnings are highly relevant to stock returns (high volatility regime), and other firms spend more time in a setting where earnings are moderately relevant to stock returns (low volatility regime).

We next link the dynamics of the firms in terms of the periods they spend in the high or low volatility regimes to measures of earnings quality. We find that firms with poor earnings quality, measured as accrual quality and smoothness, have a greater probability of spending more time in a high volatility earnings-returns regime. Although our study does not address causality, we believe that we provide an important result by showing that the quality of financial information is linked to the time series properties of the informativeness of earnings for stock returns.