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The effects of operating cash flow disclosure on earnings comparability, analysts' forecasts, and firms’ investment decisions during the Pre-IFRS era

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  • Caban-Garcia, Maria T.
  • Choi, Heeick
  • Kim, Myungsun

Abstract

We examine the effects of the availability of operating cash flow (OCF) information disclosed by firms operating in 15 international countries during the pre-IFRS era on: (1) the comparability of these firms' disaggregated earnings to those of U.S. firms for equity valuation purposes, (2) the properties of analysts' earnings forecasts, and (3) the efficiency of firms' investment decisions. We find that the comparability of disaggregated earnings improves after company-disclosed OCF information is available. We also find decreases in analysts' forecast errors and dispersion and a decrease in firms’ tendency to over- or under-invest when they are predisposed to do so.

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  • Caban-Garcia, Maria T. & Choi, Heeick & Kim, Myungsun, 2020. "The effects of operating cash flow disclosure on earnings comparability, analysts' forecasts, and firms’ investment decisions during the Pre-IFRS era," The British Accounting Review, Elsevier, vol. 52(4).
    • Handle: RePEc:eee:bracre:v:52:y:2020:i:4:s0890838920300032
    DOI: 10.1016/j.bar.2020.100883
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    More about this item

    Keywords

    Earnings comparability; Disaggregated earnings; Cash flow statement; Properties of analysts' earnings forecasts; Investment efficiency;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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