Cash flow disaggregation and the prediction of future earnings

Arthur, N; Cheng, M; Czernkowski, R

Cash flow disaggregation and the prediction of future earnings

Arthur, N Cheng, M Czernkowski, R

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Publication Type:: Journal Article
Citation:: Accounting and Finance, 2010, 50 (1), pp. 1 - 30
Issue Date:: 2010-03-01

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Field	Value	Language
dc.contributor.author	Arthur, N	en_US
dc.contributor.author	Cheng, M	en_US
dc.contributor.author	Czernkowski, R https://orcid.org/0000-0002-8381-8304	en_US
dc.date.issued	2010-03-01	en_US
dc.identifier.citation	Accounting and Finance, 2010, 50 (1), pp. 1 - 30	en_US
dc.identifier.issn	0810-5391	en_US
dc.identifier.uri	http://hdl.handle.net/10453/14012
dc.description.abstract	We examine the incremental information content of the components of cash flows from operations (CFO). Specifically the research question examined in this paper is whether models incorporating components of CFO to predict future earnings provide lower prediction errors than models incorporating simply net CFO. We use Australian data in this setting as all companies were required to provide information using the direct method during the sample period. We find that the cash flow components model is superior to an aggregate cash flow model in terms of explanatory power and predictive ability for future earnings; and that disclosure of non-core (core) cash flows components is (not) useful in both respects. Our results are of relevance to investors and analysts in estimating earnings forecasts, managers of firms in regulators' domains where choice is provided with respect to the disclosure of CFO and also to regulators' deliberations on disclosure requirements and recommendations. © The Authors. Journal compilation © 2009 AFAANZ.	en_US
dc.relation.ispartof	Accounting and Finance	en_US
dc.relation.isbasedon	10.1111/j.1467-629X.2009.00316.x	en_US
dc.subject.classification	Accounting	en_US
dc.title	Cash flow disaggregation and the prediction of future earnings	en_US
dc.type	Journal Article
utslib.citation.volume	1	en_US
utslib.citation.volume	50	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
utslib.for	1402 Applied Economics	en_US
utslib.for	1501 Accounting, Auditing and Accountability	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Accounting Discipline
utslib.copyright.status	closed_access
pubs.issue	1	en_US
pubs.publication-status	Published	en_US
pubs.volume	50	en_US

Abstract:

We examine the incremental information content of the components of cash flows from operations (CFO). Specifically the research question examined in this paper is whether models incorporating components of CFO to predict future earnings provide lower prediction errors than models incorporating simply net CFO. We use Australian data in this setting as all companies were required to provide information using the direct method during the sample period. We find that the cash flow components model is superior to an aggregate cash flow model in terms of explanatory power and predictive ability for future earnings; and that disclosure of non-core (core) cash flows components is (not) useful in both respects. Our results are of relevance to investors and analysts in estimating earnings forecasts, managers of firms in regulators' domains where choice is provided with respect to the disclosure of CFO and also to regulators' deliberations on disclosure requirements and recommendations. © The Authors. Journal compilation © 2009 AFAANZ.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/14012