Email this article 
When do investors price accrual information? Revisiting the accrual anomaly in Indonesia and Singapore
(1) Universitas Pelita Harapan
(2) Milltrust International
(3) Department of Management, Faculty of Business & Economics, Universitas Surabaya
(*) Corresponding Author
Abstract
Traditional accrual anomaly research posits that investors often overlook the accrual component of earnings, leading to a negative correlation between current-period accruals and future stock returns. However, recent studies suggest this relationship has diminished. This research investigates whether total accruals correlate more with current-period stock returns than with those one year ahead, and whether this relationship varies between Indonesia and Singapore. We analyze panel data from Industrial Goods manufacturing firms listed in these countries from 2015 to 2024, using fixed-effects regression with a country interaction term and relevant control variables. Our findings reveal that total accruals do not significantly impact one-year-ahead stock returns but are significantly and negatively linked to current-period stock returns. The interaction between accruals and country is not significant, indicating no statistical difference in accrual pricing between the two markets. These results are consistent across both halves of the sample period, suggesting that accrual information may be integrated into stock prices sooner than the traditional accrual anomaly framework predicts.
Keywords
Full Text:
PDFReferences
Bouchaud, J. P., Krueger, P., Landier, A., & Thesmar, D. (2019). Sticky expectations and the profitability anomaly. The Journal of Finance, 74(2), 639-674
Chan, K., Chan, L. K. C., Jegadeesh, N., & Lakonishok, J. (2006). Earnings quality and stock returns. The Journal of Business, 79(3), 1041–1082.
Choy, S. K., Lobo, G. J., & Tan, Y. (2022). Testing the accruals anomaly based on the speed of price adjustment.
Collins, D. W., Gong, G., & Hribar, P. (2003). Investor sophistication and the mispricing of accruals. Review of Accounting Studies, 8(2–3), 251–276.
Cooper, M. J., Gulen, H., & Schill, M. J. (2008). Asset growth and the cross-section of stock returns. The Journal of Finance, 63(4), 1609–1651.
De Bondt, W. F. M., & Thaler, R. (1985). Does the stock market overreact? The Journal of Finance, 40(3), 793–805.
Dechow, P. M., & Dichev, I. D. (2002). The quality of accruals and earnings: The role of accrual estimation errors. The accounting review, 77(s-1), 35-59
Dechow, P. M., Ge, W., Larson, C. R., & Sloan, R. G. (2011). Predicting material accounting misstatements. Contemporary accounting research, 28(1), 17-82.
Fairfield, P. M., Whisenant, J. S., & Yohn, T. L. (2003). Accrued earnings and growth: Implications for future profitability and market mispricing. The Accounting Review, 78(1), 353–371.
Fama, E. F., & French, K. R. (1992). The cross-section of expected stock returns. The Journal of Finance, 47(2), 427–465.
Greene, J., Hand, J., & Soliman, M. (2009). Going, going, gone? The demise of the accruals anomaly. working paper, University of North Carolina and University of Washington.
Hirshleifer, D., Hou, K., & Teoh, S. H. (2012). The accrual anomaly: risk or mispricing?. Management science, 58(2), 320-335.
Isoyama, H. (2024). Accruals anomalies could be explained by the adverse selection risk induced by the information structure: The case of the Japanese securities market. Cogent Economics & Finance, 12(1), 2318128.
Jegadeesh, N., & Titman, S. (1993). Returns to buying winners and selling losers: Implications for stock market efficiency. The Journal of Finance, 48(1), 65–91.
Novy-Marx, R. (2013). The other side of value: The gross profitability premium. Journal of Financial Economics, 108(1), 1–28.
Richardson, S., Tuna, I., & Wysocki, P. (2010). Accounting anomalies and fundamental analysis: A review of recent research advances. Journal of Accounting and Economics, 50(2-3), 410-454.
Ritter, M. A., & Ugras, Y. J. (2025). Quarterly vs. semiannual reporting: A cross-market analysis of earnings announcement reactions in the US and Europe. International Journal of Financial Studies, 13(4), 207.
Sloan, R. G. (1996). Do stock prices fully reflect information in accruals and cash flows about future earnings? The Accounting Review, 71(3), 289–315.
Titman, S., Wei, K. J., & Xie, F. (2004). Capital investments and stock returns. Journal of financial and Quantitative Analysis, 39(4), 677-700.
Watanabe, A., Xu, Y., Yao, T., & Yu, T. (2013). The asset growth effect: Insights from international equity markets. Journal of Financial Economics, 108(2), 529–563.
Wu, J., Zhang, L., & Zhang, X. F. (2010). The q‐theory approach to understanding the accrual anomaly. Journal of Accounting Research, 48(1), 177-223.
Wurintara, G. G., & Hamidah. (2020). The existence of accrual anomaly phenomena in Indonesia capital market. Journal of Accounting and Investment, 21(2), 334–345.
Xie, H. (2001). The mispricing of abnormal accruals. The Accounting Review, 76(3), 357–373.
DOI: https://doi.org/10.24123/mabis.v25i3.1277
Article Metrics
Abstract view : 0 timesPDF - 0 times
Refbacks
- There are currently no refbacks.
Copyright (c) 2026 Yanuar Dananjaya
This work is licensed under a Creative Commons Attribution 4.0 International License.
This work is licensed under a Creative Commons Attribution 4.0 International License. ISSN: 1412-3789. e-ISSN: 2477-1783.
 |  |  |  |
 |  |  |  |