The ability of earnings to predict future operating cash flows has been increasing - Not decreasing

• 成果类型: Article
• 署名作者: Kim, M; Kross, W
• 署名单位: State University of New York (SUNY) System; University at Buffalo, SUNY; Purdue University System; Purdue University
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/j.1475-679X.2005.00189.x
• 发表日期: 2005
• 页码: 753-780
• 关键词: VALUE-RELEVANCE; CONTRARIAN INVESTMENT; Fundamental analysis; FULLY REFLECT; stock-prices; INFORMATION; accruals; returns; valuation; RISK

摘要

We investigate the relationship between earnings and one-year-ahead operating cash flows from 1973 to 2000. Although the extant research indicates a weakening relationship between contemporaneous earnings and stock prices over time, we find that the relationship between current earnings and future operating cash flows has increased over time. This result holds for numerous divisions of our sample. Out-of-sample predictions of operating cash flows generally show increasing forecast accuracy over time. Increasing accounting conservatism appears to play a role in this phenomenon.