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Accruals, Cash Flow and Equity Values

1999; RELX Group (Netherlands); Linguagem: Inglês

10.2139/ssrn.149768

1556-5068

Mary E. Barth, William H. Beaver, John R. M. Hand, Wayne R. Landsman,

Accounting Theory and Financial Reporting

We find, as predicted, that the differential ability of accrual and cash flow components of earnings to help forecast future abnormal earnings and the persistence of the components results in the components having different valuation implications. We base our tests on Ohlson (1999) applied to fourteen industries. We find: (1) Accruals and cash flows aid in forecasting future abnormal earnings incremental to abnormal earnings and equity book value. (2) Accruals and cash flows provide explanatory power for equity market value incremental to equity book value and abnormal earnings. (3) There is evidence that accruals and cash flows valuation coefficients are consistent with the Ohlson model.