On earnings and cash flows as predictors of future cash flows

• 成果类型: Article
• 署名作者: Ball, Ray; Nikolaev, Valeri V.
• 署名单位: University of Chicago
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2021.101430
• 发表日期: 2022
• 关键词: accruals; performance; INFORMATION; ability

摘要

Do accruals-based earnings provide better information about future operating cash flows than do operating cash flows themselves, as predicted by the Financial Accounting Stan-dards Board's conceptual framework (FASB, 1978)? While this is a foundational issue in accounting, because it addresses the information added by accrual accounting methods, testing it remains unsettled. We show that when comparing the predictive ability of operating cash flows with that of an equivalent earnings measure calculated on an accrual basis, earnings outperform operating cash flows. The result becomes more pronounced when allowance is made for cross-sectional differences in the relation between firms' earnings and future cash flows. In fact, even bottom line earnings then have similar explanatory power as operating cash flows. (c) 2021 Elsevier B.V. All rights reserved.