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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

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    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, 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. John Consler & Greg M. Lepak & Susan F. Havranek, 2011. "Earnings per share versus cash flow per share as predictor of dividends per share," Managerial Finance, Emerald Group Publishing, vol. 37(5), pages 482-488, April.
    5. Christos I. Negakis, 2013. "The explanatory power of earnings for stock returns in the pre- and post-IFRS era: Some evidence from Greece," Managerial Finance, Emerald Group Publishing, vol. 39(9), pages 814-824, August.
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