- E-ISSN2233-5382
- KCI
E-ISSN : 2233-5382
Incremental Information Content of Cash Flow and Earnings in the Iranian Capital Market
Mahdi Salehi (Ferdowsi University of Mashhad)
Ali Mohammadi (Islamic Azad)
Abstract
Purpose - This study aims to examine the incremental information content of cash flw from operations and earnings in the Iranian capital market. Design, methodology, and approach - Based on market-based accounting research, this study uses statistical associations between accounting data (earnings and cash flw) and stock returns to assess/measure the incremental information content (value relevance) of cash flw and earnings. A multivariate regression model based on panel data is used to examine the incremental information content of earnings and cash flow from operations. Results - The results show that both earnings and cash flow from operations have incremental information content beyond each other. These results are consistent with the findings of recent studies. Overall, the fidings of this study support the usefulness of cash flw information in addition to earnings, in fim valuation by investors in the Iranian market. Conclusions - The study makes the following contributions to the Iranian literature on incremental information content of cash flw and earnings. First, this study employs actual cash flw data derived from cash flw statements. Second, this study employs a large sample size for a more recent period.
- keywords
- Stock Returns, Incremental Information Content, Cash Flow From Operations
Reference
Ali, A. (1994).The incremental information content of earnings, working capital from operations, and cash flows. Journal of Accounting Research, 32, 61-74.
Arab-Mazar Yazdi, M. (1995). Incremental information content of cash flows and accruals, Doctoral Dissertation. University of Tehran, Iran.
Arab-Mazar Yazdi, M., Mashayekhi, B., & Rafiei, A. (2006). Information content of cash flows and accruals in Iranian capital market. Iranian Journal of Accounting and Auditing, 43, 99-118.
Arthur, N., Cheng, M., & Czernkowski, R. (2010). Cash flow disaggregation and the prediction of future earnings. Accounting & Finance, 50, 1-30.
Board, J. L. G., & Day, J. F. S. (1989). The information content of cash flw fiures. Accounting & Business Research, 20, 3-11.
Board, J. L. G., Day, J. F. S., & Walker, M. (1989). The information content of unexpected accounting income, funds flow and cash flow: Comparative evidence for the U.S. and U.K. economies. London: Institute of Chartered Accountants in England and Wales.
Bernard, V. L., & Stober, T. L. (1989). The nature and amount of information in cash flws and accruals. The Accounting Review, 64, 624-652.
Cheng, C.S. A., & Yang, S. S. M. (2003). The incremental information content of earnings and cash flows from operations affected by their extremity. Journal of Business Finance & Accounting, 30, 73-116.
Cheng, C. S. A., Liu, C. S., & Schaefer, T. F. (1996). Earnings permanence and the incremental information content of cash flws from operations. Journal of Accounting Research, 34, 173-181.
Charitou, A., Clubb, C., & Andreou, A. (2001). The effect of earnings permanence, growth, and fim size on the usefulness of cash flws and earnings in explaining security returns: Empirical evidence for the UK. Journal of Business Finance & Accounting, 28, 563-94.
Fanatical Accounting Standards Board (FASB) (1987). Statement of Financial Accounting Standards, No. 95.
Haw, I. M., Qi, D., & Wu, W. (2001). The nature of information in accruals and cash flows in an emerging capital market:The case of China. The International Journal of Accounting, 36, 391-406.
Mostafa, W., & Dixon, R. (2013). The impact of earnings extremity on information content of cash flw. Review of Accounting and Finance, 12, 81-104.
Neill, D., Schaefer, T., Bahnson, P., & Bradbury, M. (1991). The usefulness of cash flow data: A review and synthesis. Journal of Accounting Literature, 10, 117-150.
Pouraghajan, A., Emamgholipour, M., Niazi, F., & Samakosh, A. (2012). Information content of earnings and operating cash flows: evidence from the Tehran Stock Exchange. International Journal of Economics and Finance, 4, 41-51.
Tehrani, R., & Fani-Asl, M. (2007). Relationship between cash flow from operations, accruals, and stock returns in the firms listed on Tehran Stock Exchange. Iranian Journal of Financial Research, 9, 21-32.
Trabelsi, J. E. (2013).The value relevance of earnings and cash flows: The Tunisian stock market evidence. Accounting &Finance, 4, 98-117.
Wilson, G. P. (1987).The incremental information content of the accrual and funds components of earnings after controlling for earnings. The Accounting Review, 62, 293-322.
- Downloaded
- Viewed
- 0KCI Citations
- 0WOS Citations