The usefulness of direct and indirect cash flow disclosures

Greg Clinch*, Baljit Sidhu, Samantha Sin

*Corresponding author for this work

Research output: Contribution to journalArticle

32 Citations (Scopus)

Abstract

We investigate the ability of disclosed operating cash flow and indirect accruals components to explain annual returns for a sample of Australian firms. Consistent with claims made by accounting standard setters, we find evidence of significant explanatory power for disclosed operating cash flow components beyond aggregate operating cash flows when they also have significant incremental predictive power for future (one year ahead) operating cash flows. Accrual components also have incremental explanatory power for returns. In addition, we find evidence of significant explanatory power for operating cash flow components beyond estimates of the components (based on other financial statement disclosures) for firms with large differences between disclosed and estimated components.

Original languageEnglish
Pages (from-to)383-404
Number of pages22
JournalReview of Accounting Studies
Volume7
Issue number4
DOIs
Publication statusPublished - 2002

Keywords

  • cash flows
  • accruals
  • capital markets

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