We document pervasive evidence of reversals in firm-level working capital accruals over adjacent fiscal years. We demonstrate that the majority of these accrual reversals relate to ‘good' accruals that: (i) correctly anticipate future benefits; (ii) lead to higher earnings persistence; and (iii)...

Previous research finds that EPS growth is difficult to predict and reasons that much of the observed variation in valuation multiples is due to mispricing (e.g., Lakonishok, Shleifer, and Vishny, 1994; Chan, Karceski, and Lakonishok, 2003; Israel, Laursen, and Richardson, 2021). We revisit these...