IDEAS home Printed from https://ideas.repec.org/a/hur/ijaraf/v3y2013i4p215-223.html
   My bibliography  Save this article

The Impact of High Earnings on the Informational Content of Cash Flows in the Listed Companies on Tehran Stock Exchange

Author

Listed:
  • Forough Heyrani

    (Islamic Azad University)

  • Saeid Saeida Ardakani

    (Yazd University)

  • Mahboubeh Dehestani Ardakani

    (Islamic Azad University)

Abstract

This paper tries to investigate the incremental informational content of cash flow from operations and earnings as well as the impact of high earnings on the informational content of cash flows and earnings by exploring the relationship between cash from operations and net earnings and companies’ stock return. The study sample was chosen over the time period of 2006 to 2010 of listed companies on Tehran Stock Exchange and included 150 selected companies using systematic elimination method. According to the theoretical principles and literature of the topic for analyzing data, one main hypothesis and four sub-hypotheses are were proposed and were tested along with the corresponding models. Findings suggest that earnings in relation to cash flow from operations have greater informational content. The high earnings also has no negative impact on the informational content of earnings and when earnings is at its high level, there is no difference between informational content of high and low cash flow.

Suggested Citation

  • Forough Heyrani & Saeid Saeida Ardakani & Mahboubeh Dehestani Ardakani, 2013. "The Impact of High Earnings on the Informational Content of Cash Flows in the Listed Companies on Tehran Stock Exchange," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(4), pages 215-223, October.
    • Handle: RePEc:hur:ijaraf:v:3:y:2013:i:4:p:215-223
    as

    Download full text from publisher

    File URL: http://hrmars.com/hrmars_papers/Article_23_The_Impact_of_High_Earnings.pdf
    Download Restriction: no
    File URL: http://hrmars.com/hrmars_papers/Article_23_The_Impact_of_High_Earnings.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Allen, Eric J. & Larson, Chad R. & Sloan, Richard G., 2013. "Accrual reversals, earnings and stock returns," Journal of Accounting and Economics, Elsevier, vol. 56(1), pages 113-129.
    2. Prodosh Eugene Simlai, 2013. "Cash‐flows, earnings, and time‐varying expected stock returns," Journal of Economic and Administrative Sciences, Emerald Group Publishing Limited, vol. 29(1), pages 42-62, May.
    3. Hirshleifer, David & Hou, Kewei & Teoh, Siew Hong, 2009. "Accruals, cash flows, and aggregate stock returns," Journal of Financial Economics, Elsevier, vol. 91(3), pages 389-406, March.
    4. Miranda-Lopez, Jose E. & Nichols, Linda M., 2012. "The use of earnings and cash flows in investment decisions in the U.S. and Mexico: Experimental evidence," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 21(2), pages 198-208.
    5. Prodosh Eugene Simlai, 2013. "Cash-flows, earnings, and time-varying expected stock returns," Journal of Economic and Administrative Sciences, Emerald Group Publishing, vol. 29(1), pages 42-62, February.
    6. Ibrahim El‐Sayed Ebaid, 2011. "Accruals and the prediction of future cash flows," Management Research Review, Emerald Group Publishing Limited, vol. 34(7), pages 838-853, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Forough Heirany & Mahmoud Moeinadin & Manije Nazemizadeh, 2014. "The Role of Accrual Decomposition in Increasing the Information Value," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(1), pages 309-318, January.
    2. Ming‐Chang Wang & Yu‐Jia Ding, 2021. "Does the quarterly accrual anomaly exist in Taiwan's stock market? Evidence from Manager's earnings management," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(3), pages 688-701, April.
    3. Baloch, Muhammad Saad & Hassan, Arshad, 2016. "Accrual Reversals And Company Performance: Analysis Of Emerging Market," MPRA Paper 80973, University Library of Munich, Germany.
    4. Hui, Kai Wai & Nelson, Karen K. & Yeung, P. Eric, 2016. "On the persistence and pricing of industry-wide and firm-specific earnings, cash flows, and accruals," Journal of Accounting and Economics, Elsevier, vol. 61(1), pages 185-202.
    5. Yingying Xin & Xiao Zeng & Zhengying Luo, 2022. "Customers' tone in MD&A disclosure and suppliers' inventory efficiency: Evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 3833-3853, December.
    6. Lijuan Zhang & Mark Wilson, 2018. "Does the accruals quality premium arise from information risk?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(2), pages 599-632, June.
    7. Luo, Yan & Wang, Xiaohuan & Zhang, Chenyang & Huang, Wei, 2021. "Accounting-based downside risk and expected stock returns: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 78(C).
    8. Jorgensen, Bjorn & Li, Jing & Sadka, Gil, 2012. "Earnings dispersion and aggregate stock returns," Journal of Accounting and Economics, Elsevier, vol. 53(1), pages 1-20.
    9. Nezlobin, Alexander & Sloan, Richard G. & Giedt, Jenny Zha, 2022. "Construct validity in accruals quality research," LSE Research Online Documents on Economics 112165, London School of Economics and Political Science, LSE Library.
    10. Kitagawa, Norio, 2021. "Macroeconomic uncertainty and management forecast accuracy," Journal of Contemporary Accounting and Economics, Elsevier, vol. 17(3).
    11. 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).
    12. Mingzi Song & Naoto Oshiro & Akinobu Shuto, 2016. "Predicting Accounting Fraud: Evidence from Japan," The Japanese Accounting Review, Research Institute for Economics & Business Administration, Kobe University, vol. 6, pages 17-63, December.
    13. Michael Neel & Irfan Safdar, 2024. "Financial statement relevance, representational faithfulness, and comparability," Review of Quantitative Finance and Accounting, Springer, vol. 62(1), pages 309-339, January.
    14. Timothy A. Seidel & Chad A. Simon & Nathaniel M. Stephens, 2020. "Management bias across multiple accounting estimates," Review of Accounting Studies, Springer, vol. 25(1), pages 1-53, March.
    15. Yuan Liao & Xinjie Ma & Andreas Neuhierl & Zhentao Shi, 2023. "Economic Forecasts Using Many Noises," Papers 2312.05593, arXiv.org, revised Dec 2023.
    16. Huang, Yuxuan & Yang, Shenggang & Zhu, Qi, 2021. "Brand equity and the Covid-19 stock market crash: Evidence from U.S. listed firms," Finance Research Letters, Elsevier, vol. 43(C).
    17. Martin, Rachel, 2019. "Examination and implications of experimental research on investor perceptions," Journal of Accounting Literature, Elsevier, vol. 43(C), pages 145-169.
    18. Zhu, Tingting & Lu, Meiting & Shan, Yaowen & Zhang, Yuanlong, 2015. "Accrual-based and real activity earnings management at the back door: Evidence from Chinese reverse mergers," Pacific-Basin Finance Journal, Elsevier, vol. 35(PA), pages 317-339.
    19. Graham, Roger C. & Moore, Jared A., 2018. "The mitigation of high-growth-related accounting distortions after sarbanes-oxley," Research in Accounting Regulation, Elsevier, vol. 30(2), pages 82-94.
    20. Chue, Timothy K. & Xu, Jin Karen, 2022. "Profitability, asset investment, and aggregate stock returns," Journal of Banking & Finance, Elsevier, vol. 143(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hur:ijaraf:v:3:y:2013:i:4:p:215-223. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Hassan Danial Aslam (email available below). General contact details of provider: http://hrmars.com/index.php/pages/detail/Accounting-Finance-Journal .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.