Consistent with the implications of conditional conservatism, we show that the differential persistence of cash flows relative to that of accruals is higher across loss firms than profit firms. Further, we find that the positive relation of cash flows with future returns is more severe in loss...

Using the percent accrual measure proposed by Hazfalla et al. (2011), we empirically evaluate the predictions of earnings fixation hypothesis and limits to arbitrage hypothesis on the accrual anomaly in the U.K. stock market. We show a strong negative relation of percent accruals with future...