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FINANCIAL REPORTING BY FOUR UK CLEARING BANKS: A CASH FLOW EXIT PRICE (CaFE) APPROACH

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  • R.T. Wearing

Abstract

This paper examines the published accounts of the four main UK clearing banks during the 1980s and investigates some of the economic factors with which the banks had to contend. A particular focus concerns less developed country (LDC) debt, provisions against losses on the clearing banks’ LDC debt portfolios and factors which might influence the timing of provisions. We find a significant and positive association between share returns and future changes in cash flow plus adjustment for exit price changes, and suggest that this measure may be more closely associated with market expectations than changes in reported profit.

Suggested Citation

  • R.T. Wearing, 1994. "FINANCIAL REPORTING BY FOUR UK CLEARING BANKS: A CASH FLOW EXIT PRICE (CaFE) APPROACH," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 21(7), pages 917-943, October.
    • Handle: RePEc:bla:jbfnac:v:21:y:1994:i:7:p:917-943
    DOI: 10.1111/j.1468-5957.1994.tb00356.x
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    References listed on IDEAS

    as
    1. A.J. Arnold & R.T. Wearing, 1988. "Cash Flows, Exit Prices and British Airways," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 15(3), pages 311-333, September.
    2. Christopher K. Ma, 1988. "Loan Loss Reserves and Income Smoothing: the Experience In the U.S. Banking Industry," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 15(4), pages 487-497, December.
    3. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
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