Accruals, Cash Flows, and Equity Values

Mary E. Barth, William H. Beaver, John R. M. Hand and Wayne R. Landsman
Additional contact information
Mary E. Barth: Stanford University
William H. Beaver: Stanford University
John R. M. Hand: University of North Carolina at Chapel Hill
Wayne R. Landsman: University of North Carolina at Chapel Hill

Review of Accounting Studies, 1999, vol. 4, issue 3, No 6, 205-229

Abstract: Abstract 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 result 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.

Keywords: Cash Flow; Public Finance; Explanatory Power; Equity Market; Flow Component (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (4)

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DOI: 10.1023/A:1009630100586

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