4.1.4.5. Capital market research implications.Of direct relevance in this review
of the capital markets literature is the question whether capital market studies
are affected by problems with the discretionary accrual models.I believe they
are.Let me give one example.Consider the hypothesis in Aharony et al. (1993),
Friedlan (1994), Teoh et al.(1998b, c), and other studies that in the years
leading up to an IPO, management biases financial performance upward
through positive discretionary accruals