Accruals, Persistence of Profits and Stock Returns in Brazilian Public Companies

Renata Turola Takamatsu, Luiz Paulo Lopes Fávero

School of Economics, Business and Accountancy University of S?o Paulo, S?o Paulo, Brazil.

DOI: 10.4236/me.2013.42014                

Abstract

The central aim in this research was to assess investors’ accounting information interpretation skills. Therefore, it was assessed how different profit components would affect the future profitability of publicly traded Brazilian companies. Through a sample of all Brazilian public companies listed in Bovespa from 1995 to 2010, the research results demonstrated that current accruals were incapable of explaining future abnormal return behavior in the firms analyzed. In addition, no significant abnormal returns were reached in an accruals-based investment strategy, indicating that investors would be capable of interpreting and pricing accounting data.

Keywords

Accounting Accruals; Persistence of Profits, Stock Returns, Brazil, Panel Data

Conflicts of Interest

The authors declare no conflicts of interest.

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