 The role of cash flows and accruals in explaining security returns: evidence for the UKAndreas Charitou European Accounting Review, 1997, vol. 6, issue 4, 629-652 Abstract: The assessment of earnings usefulness in returns studies has been at the forefront of accounting research since the seminal work of Ball and Brown (1968). Recently, regulatory bodies worldwide have paid increased attention to cash flow reporting. Empirical research provides evidence that earnings information dominates cash flows in market-based accounting research. This study extends the growing empirical literature on the association of earnings and cash flows with security returns. We hypothesize that the association of cash flows with security returns improves (i) the smaller the absolute magnitude of aggregate accruals, (ii) the longer the measurement interval and (iii) the shorter the firm's operating cycle. The dataset consists of all UK firms included in the Global vantage database for the period 1984-1992. This study provides evidence that cash flows play a more important role in the marketplace when the operating cycle, magnitude of accruals and the measurement interval are taken into consideration. Moreover, results indicate that cash flows have more information content than earnings in explaining security returns. Date: 1997 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:euract:v:6:y:1997:i:4:p:629-652 Ordering information: This journal article can be ordered from DOI: 10.1080/09638189700000005 Access Statistics for this article European Accounting Review is currently edited by Laurence van Lent More articles in European Accounting Review from Taylor & Francis Journals |
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