Value relevance of discretionary accruals in the Asian financial crisis of 1997-1998

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

71 Scopus Citations
View graph of relations


Related Research Unit(s)


Original languageEnglish
Pages (from-to)166-187
Journal / PublicationJournal of Accounting and Public Policy
Issue number2
Online published29 Oct 2010
Publication statusPublished - Mar 2011


This study investigates whether and how the information values of reported earnings and their components changed around the Asian financial crisis of 1997-1998. Regression analyses on a sample of 10,406 firm-years from nine Asian countries from 1995 to 2000 reveal the following. First, the crisis led to a significant decline in the value relevance of discretionary accruals but had no significant impact on the value relevance of non-discretionary earnings components such as operating cash flows and non-discretionary accruals. Second, the decrease in the value relevance of discretionary accruals during the crisis was more severe for firms in countries with weak institutions than for those in countries with strong institutions. Third, the value relevance of discretionary accruals declined to a greater extent for firms with high information asymmetries than for firms with low information asymmetries. Our results are robust to a variety of sensitivity checks.

Bibliographic Note

Full text of this publication does not contain sufficient affiliation information. With consent from the author(s) concerned, the Research Unit(s) information for this record is based on the existing academic department affiliation of the author(s).