The value-relevance of cash flows and accruals: The role of investment opportunities

• 成果类型: Article
• 署名作者: Kumar, Krishna R.; Krishnan, Gopal V.
• 署名单位: George Washington University; Lehigh University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr.2008.83.4.997
• 发表日期: 2008
• 页码: 997-1040
• 关键词: incremental information-content; ACCOUNTING EARNINGS; ADDITIONAL EVIDENCE; price responses; stock-prices; AGENCY COSTS; association; firm; determinants; performance

摘要

We examine the role of investment opportunities as a determinant of the relative importance of cash flows from operations (CFO) and accruals in firm valuation. We find that at low investment-opportunity levels, CFO value-relevance increases with investment opportunities. When investment opportunities are high, accrual value-relevance declines as investment opportunities increase. Consequently, earnings value-relevance first varies directly and then inversely with investment opportunities. We show that the increase in CFO value-relevance is consistent with cost differentials between internal and external financing causing CFO to be an increasingly important determinant of the realization of investment opportunities. The decline in accrual value-relevance at high investment-opportunity levels appears to be attributable to accounting measurement deficiencies.