Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/24187
Title: Inventory policy, accruals quality and information risk
Authors: Krishnan, GV
Srinidhi, B
Su, LN 
Keywords: Accruals quality
Asset pricing
Cost of capital
Information risk
Inventory
Issue Date: 2008
Publisher: Springer
Source: Review of accounting studies, 2008, v. 13, no. 2-3, p. 369-410 How to cite?
Journal: Review of accounting studies 
Abstract: This paper provides evidence consistent with firms with Last-in-first-out (LIFO) inventory policy being priced by the market as having lower information risk than First-in-first-out (FIFO) firms. Furthermore, the paper shows that this pricing differential is sustained after controlling for accruals quality, suggesting that the inventory policy signals some information risk characteristics that are not captured by accruals quality measure. We investigate the relation between inventory policy and accruals quality and find that accruals quality is systematically worse for FIFO firms than for LIFO firms after controlling for correlated omitted variables and known firm attributes. These findings complement the currently established relationship between the cost of capital, market pricing and accruals quality by focusing on the need for understanding the incremental effects of individual accounting policies.
URI: http://hdl.handle.net/10397/24187
ISSN: 1380-6653
DOI: 10.1007/s11142-008-9067-2
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