Value relevance of aggregated and disaggregated earnings in India: Significance of intangible intensity

Pooja Kumari and Chandra Sekhar Mishra

Journal of International Accounting, Auditing and Taxation, 2020, vol. 39, issue C

Abstract: This paper explores the relative performance of aggregate earnings and disaggregated earnings components (accruals and cash flows) to describe the market values of equity and earning persistence in India. Further, we explore the difference in value relevance of earning and earning components to explain market values of equity and earning persistence between intangible and non-intangible intensive firms. We adopted the Barth et al. (1999, 2005) linear information structure, which is based on the Ohlson (1999) model. Our findings suggest that the disaggregated earnings outperform aggregated earnings to explain market values of equity and earning persistence, irrespective to the nature of a firm’s intangible intensity. However, the incremental explanatory power of disaggregated earnings is higher in intangible intensive firms compared to non-intangible intensive firms. Moreover, the incremental value relevance of accruals is higher than the incremental explanatory power of cash flows in intangible intensive firms and lower for non-intangible intensive firms.

Keywords: Aggregated earnings; Disaggregated earnings; Equity value; Future earnings; Intangible intensity (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jiaata:v:39:y:2020:i:c:s1061951820300227

DOI: 10.1016/j.intaccaudtax.2020.100321

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