Abstract
This paper investigates which accounting variable has superior predictive ability for future cash flow: current cash flow from operations, or current earnings. The question is examined in an Australian context for the years 1995 to 2005, on a sample of 350 firms. The question is also examined by industry for the same firms. In most U.S. studies, superior predictions are obtained using current earnings. However, the same result is not expected in Australia, due to the different industrial composition of the economy, and the superiority of cash flow data prepared under Australian accounting standards. Consistent with our expectation, the results indicate that current cash flow from operations has superior predictive ability over current earnings for future cash flow from operations, and also that cash flow from operations has higher incremental information content than current earnings.
Original language | English |
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Title of host publication | 31st Annual Congress of the European Accounting Association |
Place of Publication | Rotterdam, Holland |
Publisher | European Accounting Association |
Number of pages | 15 |
Publication status | Published - 2008 |
Event | Annual Congress of the European Accounting Association (31st : 2008) - Rotterdam, Holland Duration: 23 Apr 2008 → 25 Apr 2008 |
Conference
Conference | Annual Congress of the European Accounting Association (31st : 2008) |
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City | Rotterdam, Holland |
Period | 23/04/08 → 25/04/08 |