Evaluating the Accrual Anomaly in the Chinese Stock Market with the Decomposition Method

Peer Reviewed
17 February 2020

Zhuo Huang, Zhimin Qiu, Dawei Lin

We evaluate the explanations for accrual anomaly in the Chinese stock market using the decomposition method. The results show that institutional ownership best explains the accrual anomaly with an explanatory power of about 46%, equity growth (EG) explains 12% of the anomaly, and the residual fraction of around 32% is unexplained by any candidate explanations. Our findings indicate that the naïve investor fixation hypothesis is favored to explain the accrual anomaly in China, and the existing explanations cannot fully explain the anomaly.

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Publication reference
Huang, Z., Qiu, Z., & Lin, D. (2020). Evaluating the accrual anomaly in the Chinese stock market with the decomposition method. China Economic Journal, 13(3), 270–289. https://doi.org/10.1080/17538963.2020.1726601
Publication | 21 March 2022