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Relevance of Discrecionary Accruals in Ohlson Model: the Case of Mexico

Author

Listed:
  • Rocío Durán-Vázquez

    (Department of Finance and Accounting, Universidad de las Américas Puebla)

  • Arturo Lorenzo-Valdés

    (Department of Finance and Accounting, Universidad de las Américas Puebla)

  • Juan Manuel San Martín-Reyna

    (Department of Business Management, Universidad de las Américas Puebla)

Abstract
This study applied the modified Jones´ model (1991) for selected companies of Mexico. This model aims to assess the impact of Discretionary Accrual Information (DAI) on financial reporting statements, in order to identify the value relevance of “earnings quality”. We applied methodological criteria of Chung et al (2005) and Mukit & Iskandar (2009). We analyzed financial information of the 35 stock included in the Index of Prices and Quotations (IPC) of the Mexican Stock Exchange (BMV) for the period 2000 to 2011. 19 companies met the specifications of the model, for 48 quarters of information. The analysis was done in three parts: first, an analysis of the modified Jones´ model under panel data considerations by using fixed effects and adjustments of performing autocorrelation of order 1; second, a correlation analysis between the residuals of the modified Jones´ model and the return of stock price in 3 annual closings years of study: 2007, 2008 and 2009; and third, we incorporated this variable (DAI) in the Ohlson model (of the financial and corporate accounting literature) and we tested it with panel data analysis, under fixed effects, throughout the study period.

Suggested Citation

  • Rocío Durán-Vázquez & Arturo Lorenzo-Valdés & Juan Manuel San Martín-Reyna, 2012. "Relevance of Discrecionary Accruals in Ohlson Model: the Case of Mexico," Journal of Entrepreneurship, Management and Innovation, Fundacja Upowszechniająca Wiedzę i Naukę "Cognitione", vol. 8(3), pages 21-34.
    • Handle: RePEc:aae:journl:v:8:y:2012:i:3:p:21-34
    DOI: 10.7341/2012832
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    References listed on IDEAS

    as
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