The Accounting Review Vol. 73 No. 3 1998
Additional Evidence on the Incremental Information Content of Cash Flows and Accruals: The Impact of Errors in Measuring Market Expectations.
Abstract
This study evaluates the relation between security returns and funds-based earnings components. We document that proxies for market expectations of the components that are based on measures of historical serial- and cross-dependencies are substantially more accurate than random-walk proxies. Moreover, we detect significantly higher valuations of the operating cash flow component of earnings, relative to current accruals, when market expectations are represented using the dependency-based predictions. Such differential valuation is not detectable for random-walk representations. Contrary to results in Ali (1994), we find incremental information in unexpected cash flows over the whole spectrum (moderate and extreme) of unexpected cash flow realizations.
- DOI
- 10.2308/tar-902587
- Volume
- 73
- Issue
- 3
- Pages
- 373-385
- Language
- en
- Sources
- openalex crossref