An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Troy D. Janes
State Unversity of New York at Buffalo

Abstract: This paper examines the relation between accounting accruals and financial distress, extending the literature on accruals by documenting that, controlling for earnings, the occurrence of financial distress is significantly higher for firms with extreme accruals (either low or high). Results also show that there is a strong association between high cash flow volatility and financial distress and that cash flow volatility and accruals provide different information for the prediction of financial distress. Finally, in contrast with other factors predicting financial distress, this paper shows that extreme accruals are associated with financial distress over a longer horizon.

Back to Session Listing

AAA Home Page