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Authors
Advisor(s)
Abstract(s)
We investigate whether the positive relation between accounting accruals and information
asymmetry documented for U.S. stock markets also holds for European markets, considered
as a whole and at the country level. This research is relevant because this relation is likely
to be affected by differences in accounting standards used by companies for financial reporting,
in the traditional use of the banking system or capital markets for firm financing, in legal systems
and cultural environment. We find that in European stock markets discretionary accruals are
positively related with the Corwin and Schultz high-low spread estimator used as a proxy
for information asymmetry. Our results suggest that the earnings management component
of accruals outweighs the informational component, but the significance of the relation varies
across countries. Further, such association tends to be stronger for firms with the highest levels
of positive discretionary accruals. Consistent with the evidence provided by the authors, our
results also suggest that the high-low spread estimator is more efficient than the closing bid-ask
spread when analysing the impact of information quality on information asymmetry.
Description
Keywords
Information quality Discretionary accruals High-low spread estimator Information asymmetry
Citation
Cerqueira, A., Pereira, C. (2015)
Publisher
Prague Economic Papars