The prediction of future cash flows based on operating cash flows, earnings and accruals in the French context

Benjamin Noury, Helmi Hammami, A.A. Ousama and Rami Zeitun
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Helmi Hammami: ESC [Rennes] - ESC Rennes School of Business
A.A. Ousama: Qatar University
Rami Zeitun: Qatar University

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Abstract: This study investigates the aptitudes of the cash-based and accrual-based accounting data for predicting future cash flows from operations in the French context. In addition, our paper aims to investigate the effect of the economic crisis on the prediction of future cash flow. The sample consists of 61 non-financial French listed companies, using annual data over the period 1999–2016.​ The study found that, regardless of the period, the model based on the operating cash flows combined with disaggregate accruals has a stronger explanatory power for predicting future operating cash flows, compared to both earnings and operating cash flows combined with the aggregate accruals models. Moreover, our results show that the aggregation of earnings falsifies the contribution of each accrual item and, as a result, the decomposition of earnings into cash flows and disaggregate accrual enables a much more accurate explanation of future operating cash flows.

Keywords: Cash flows; Earnings; Accruals; Economic crisis; France (search for similar items in EconPapers)
Date: 2020-12
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Citations: View citations in EconPapers (1)

Published in Journal of Behavioral and Experimental Finance, 2020, 28, pp.100414. ⟨10.1016/j.jbef.2020.100414⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03163637

DOI: 10.1016/j.jbef.2020.100414

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