The informativeness of U.S. banks’ statements of cash flows

Zhan Gao, Weijia Li and O’Hanlon, John

Journal of Accounting Literature, 2019, vol. 43, issue C, 1-18

Abstract: Banks, financial statement users, and accounting standard setters have long disagreed on the informativeness of banks’ statements of cash flows (SCFs) and there is a lack of relevant evidence in the literature. This paper examines the informativeness of the SCFs of U.S. commercial banks in two settings where SCFs are purported to be useful. The first analysis tests the incremental value relevance of banks’ SCFs beyond income statements and balance sheets and compares bank's SCFs with those of industrial firms. We find that banks’ SCFs have limited incremental value relevance, and are much less value relevant than industrial firms’ SCFs. The second analysis examines and finds no distress-predictive power of banks’ SCFs, especially in the presence of standard distress predictors. Overall, our results are consistent with the view that banks’ SCFs have limited informativeness.

Keywords: Statement of cash flows; Banks; Value relevance; Distress prediction (search for similar items in EconPapers)
JEL-codes: G21 M41 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:joacli:v:43:y:2019:i:c:p:1-18

DOI: 10.1016/j.acclit.2019.03.001

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