Aggregate discretionary accruals and market return predictability: comparison at the industry and national levels

Abstract

This paper examines whether aggregate discretionary accruals affect market return predictability at the industry and national level. Prior research shows aggregate discretion-ary accruals mainly contain information about changes in economic conditions. Differences in sensitivity to economic condition are found to explain different return predictability of aggregate discretionary accruals at the industry and national levels. These results support risk-based explanation for accrual-return relation at the aggregate level.