On the basis of an accrual decomposition into two components capturing output growth and accounting distortions, this paper analyzes the effects of accounting accruals on firms’ future performance in the U.K. stock market. Findings reveal a strong negative association of accruals with future...

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...