Does cash-based operating profitability explain the accruals anomaly in China?

Qingjie Du, Yang Wang, K. C.John Wei

Research output: Journal article publicationJournal articleAcademic researchpeer-review

Abstract

We investigate the relations between accruals, operating profitability, cash-based operating profitability, and the cross-section of expected stock returns in U.S. and Chinese markets. By replicating the main results in Ball et al. (2016 JFE), we confirm that cash-based operating profitability subsumes the return predictability of accruals and operating profitability in the U.S. market. Extending to the Chinese market, we similarly find that operating profitability and cash-based profitability can both predict returns but in contrast, operating profitability subsumes cash-based profitability.

Original languageEnglish
Article number101336
JournalPacific Basin Finance Journal
Volume61
DOIs
Publication statusPublished - Jun 2020

Keywords

  • Accruals
  • Cash-based operating profitability
  • Operating profitability
  • Return predictability

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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