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The Predictive Ability of Quarterly Financial Statements

Author

Listed:
  • Hui Zhou

    (Faculty of Business and Economics, University of Auckland Business School, Auckland 1142, New Zealand)

  • Worapree Ole Maneesoonthorn

    (Melbourne Business School, University of Melbourne, Melbourne, VIC 3053, Australia)

  • Xiangjin Bruce Chen

    (Independent Researcher, Melbourne, VIC 3000, Australia)

Abstract

A fundamental role of financial reporting is to provide information useful in forecasting future cash flows. Applying up-to-date time series modelling techniques, this study provides direct evidence on the usefulness of quarterly data in predicting future operating cash flows. Moreover, we show that the predictive gain from using quarterly data is larger for asset-heavy industries and industries with higher levels of earnings smoothness. This study contributes to the accounting literature by examining the usefulness of quarterly financial statements in predicting the realization of future cash flows. Our results help fill the gap in knowledge on quarterly financial statements and provide new insights on why the frequency of financial reporting matters. In addition, our findings have important policy implications for the ongoing debate over interim reporting requirements in multiple jurisdictions around the world.

Suggested Citation

  • Hui Zhou & Worapree Ole Maneesoonthorn & Xiangjin Bruce Chen, 2021. "The Predictive Ability of Quarterly Financial Statements," IJFS, MDPI, vol. 9(3), pages 1-18, September.
    • Handle: RePEc:gam:jijfss:v:9:y:2021:i:3:p:50-:d:635744
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    References listed on IDEAS

    as
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