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Pricing and Persistence of Accruals and Cash Flows: Evidence from Indian Midcap Companies

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  • Varun Dawar

Abstract

Based on the models developed by Ohlson (1995 and 1999), the paper examines the persistency, forecasting and valuation relevance of earning components (accruals and cash flows) for a period of 10 years using NSE midcap 50 companies. The empirical research which uses panel data analysis (fixed effect) provides evidence regarding persistence ability and valuation relevance of earning components. The study, however, shows differing results regarding forecasting relevance of earning components. While cash flows tend to exhibit forecasting relevance (cash flows help in forecasting future abnormal earnings incremental to abnormal earnings and book value), accruals do not aid in forecasting future abnormal earnings, thereby showing forecasting irrelevance in the Indian midcap space.

Suggested Citation

  • Varun Dawar, 2013. "Pricing and Persistence of Accruals and Cash Flows: Evidence from Indian Midcap Companies," The IUP Journal of Accounting Research and Audit Practices, IUP Publications, vol. 0(3), pages 41-52, July.
    • Handle: RePEc:icf:icfjar:v:12:y:2013:i:3:p:41-52
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