We study return predictability attributable to bloated balance sheets in European capital markets and find that the NOA anomaly is more severe across loss years and is significantly attenuated across profit years. A hedge trading strategy on NOA for loss firms generate large raw and abnormal...

The current study examines the association of cash subcomponents of earnings with future profitability and stock returns, conditional on the sign of current profitability. The empirical findings, based on a sample of UK listed firms for the period 1989-2013, indicate that, the higher persistence...