Abstract
This paper investigates the effect of the accruals anomaly on the stock returns in Argentina, Brazil, Chile, Mexico, and Peru. We observe whether the institutional aspects of government quality and rule preference culture affect the abnormal returns from accruals. For this purpose, we applied the Mishkin test proposed by Sloan (1996). We regress the future abnormal return on accruals, size, earnings per share, and market to book for all countries, for each country, and for institutional factors (government quality and rule preference culture) in a period between 2004 and 2016. The results confirm the presence of abnormal returns in Latin American capital market, particularly in Brazil and Peru, and also in countries with low government quality and low rule preference culture. These institutional factors help to explain the accrual anomaly; therefore, investors in Brazil and Peru do not fully comprehend that greater subjectivity in accruals and make flawed pricing decisions.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: Journal of International Accounting, Auditing and Taxation
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
