Cash-Backed Earnings Quality and Price-to-Book Valuation among Global Clean200 Firms

This study examines whether cash-backed earnings quality (CBQ) is associated with the price-to-book (P/B) valuation of global Clean200 firms. CBQ is measured by combining the difference between operating cash flow relative to assets (OCF/Assets) and return on assets (ROA) with the difference between operating cash-flow margin (OCF Margin) and net profit margin (NP Margin). Using a cross-sectional sample of 198 firms, the study estimates regression models controlling for profitability, growth, operating efficiency, leverage, firm size, sector, and region. The results show that firms whose reported profitability is more strongly supported by OCF tend to have higher P/B valuations. OCF also provides incremental valuation information beyond conventional profitability measures. The main finding remains generally consistent across alternative cash-quality measures, country fixed effects, heteroskedasticity-consistent standard errors, stricter winsorization, and leave-one-country-out analyses, although the evidence is weaker under equal-country weighting and for some alternative valuation multiples. The study extends earnings-quality research to environmentally oriented firms and introduces a composite measure that captures the cash support of earnings from both asset-based and revenue-based perspectives. The findings suggest that CBQ can complement traditional profitability indicators when investors and analysts evaluate the financial credibility of clean-economy firms.