F u (2019) investigates the relationship between Chinese mutual fund ownership and the accrual anomaly in the Chinese equity market. The paper presents compelling evidence that the accrual anomaly is stronger for firms with high levels of mutual fund ownership than for firms with low levels of mutual fund ownership. More specifically, the evidence in the paper indicates that Chinese firms with high levels of mutual fund ownership exhibit the accrual anomaly, while Chinese firms with low levels of mutual fund ownership do not. In addition, the author finds that the mispricing of accruals in firms with high mutual fund ownership is primarily driven by discretionary accruals.
From an academic standpoint, the paper makes two meaningful contributions to the literature. First, the lack of evidence supporting the accrual anomaly for Chinese firms with low levels of mutual fund ownership extends the findings in Pincus, Rajgopal, and Venkatachalam (2007) that the...
