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Investor Response to Cash Flow Information

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  • Neil, Mahdi Garrod Hadi

Abstract

In this study the usefulness of cash flow data as required by the UK standard, FRS1, is evaluated and cash flow per share is investigated as a possible specification of cash flow data that may contain information value for security markets. Recent innovation in earnings response models are used to test the robustness of the results and provide further insights into the time series properties of cash flow numbers. The findings indicate that the disaggregation of cash flow as required under FRS1 contains information beyond aggregate cash flow but that the required disaggregation is not optimal from an information standpoint. There is little evidence of any incremental information value of cash flow per share over cash flow numbers.

Suggested Citation

  • Neil, Mahdi Garrod Hadi, 1998. "Investor Response to Cash Flow Information," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 25(5‐6), pages 613-630, June.
    • Handle: RePEc:bla:jbfnac:v:25:y:1998:i:5-6:p:613-630
    DOI: 10.1111/1468-5957.t01-1-00204
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    Cited by:

    1. Jaehong Lee & Eunsoo Kim, 2019. "Foreign Monitoring and Predictability of Future Cash Flow," Sustainability, MDPI, vol. 11(18), pages 1-22, September.
    2. Dr. Melita Charitou, 2012. "Earnings volatility and the role of cash flows in the capital markets: Empirical evidence," International Journal of Business and Social Research, LAR Center Press, vol. 2(2), pages 12-19, April.
    3. Kabir, M.R., 1997. "The Usefulness of the Most Widely Reported Dutch Financial Statement Numbers to Stock Market Investors," Other publications TiSEM b31e595a-e80d-44ce-9646-4, Tilburg University, School of Economics and Management.
    4. Melita CHARITOU & Petros LOIS & Adamos VLITTIS, 2010. "Do Capital Markets Value Earnings And Cash Flows Alike? International Empirical Evidence," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 5(3(13)/Fal), pages 173-183.
    5. Akbar, Saeed & Shah, Syed Zulfiqar Ali & Stark, Andrew W., 2011. "The value relevance of cash flows, current accruals, and non-current accruals in the UK," International Review of Financial Analysis, Elsevier, vol. 20(5), pages 311-319.
    6. Takashi Obinata, 2002. "Concept and Relevance of Income," CIRJE F-Series CIRJE-F-171, CIRJE, Faculty of Economics, University of Tokyo.
    7. Hadri Kusuma, 2014. "The Incremental Information Content of the Cash Flow Statement: An Australian Empirical Investigation," International Journal of Business Administration, International Journal of Business Administration, Sciedu Press, vol. 5(4), pages 90-102, July.
    8. Ali Al‐Attar & Simon Hussain, 2004. "Corporate Data and Future Cash Flows," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(7‐8), pages 861-903, September.
    9. C.S. Agnes Cheng & Simon S.M. Yang, 2003. "The Incremental Information Content of Earnings and Cash Flows from Operations Affected by Their Extremity," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(1‐2), pages 73-116, January.
    10. De Andrés Fazio, Salvador & Urquía Grande, Elena & Pérez Estébanez, Raquel, 2022. "The “secret life” of the Statement of Cash Flow: A bibliometric analysis," Cuadernos de Gestión, Universidad del País Vasco - Instituto de Economía Aplicada a la Empresa (IEAE).
    11. Beattie, Vivien, 2005. "Moving the financial accounting research front forward: the UK contribution," The British Accounting Review, Elsevier, vol. 37(1), pages 85-114.

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