On the other hand, if managers used their accruals discretion opportunistically to manage earnings, discretionary accruals would distort the value relevance of reported earnings and become a measure less reliable and informative of company performance than cash flows. Understanding the role of managerial discretion in an institutional environment where corporate governance is less regulated and the choice of governance mechanisms is voluntary would be of interest to market participants and regulators. The second study then examined the relationship between discretionary accruals and stock returns to see whether discretionary accruals represent signaling or opportunistic earnings management in