Research has shown that a trading strategy based on publicly available accounting
accrual information can earn abnormal returns of approximately 10 percent in the
year after it is applied. This article reports a study of whether this
“accruals anomaly” is sensitive to company size. The empirical
results suggest that the interaction between company size and accruals provides
incremental information about future returns and that the accruals anomaly is
not independent of company size. The negative abnormal returns when an
accruals-anomaly strategy is applied come primarily from the larger companies,
and the positive abnormal returns come from the smaller companies.