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A note on the persistence of residual income

Research output: Contribution to conference - Without ISBN/ISSN Conference paperpeer-review

Published
Publication date19/05/2010
Number of pages29
Pages1-29
<mark>Original language</mark>English
Event33rd Annual Congress of European Accounting Association - Istanbul, Turkey
Duration: 19/05/201021/05/2010

Conference

Conference33rd Annual Congress of European Accounting Association
CountryTurkey
CityIstanbul
Period19/05/1021/05/10

Abstract

This paper investigates the behavior of residual income scaled by beginning of period book value, i.e., residual return on equity (ROE), by performing panel unit root tests as well panel regression tests on Swedish data. Results show that residual return on equity does not follow a random walk, nor is it transitory, yet it is much more transitory than what previous studies indicate. The study also proposes a method to design similar studies such that they can use data from privately held firms.