The Informativeness of US Banks' Statements of Cash Flows

Journal of Accounting Literature (2019)

Posted: 24 Feb 2015 Last revised: 7 Mar 2019

See all articles by Zhan Gao

Zhan Gao

Lancaster University

Weijia Li

Lancaster University Management School

John O'Hanlon

Lancaster University Management School

Date Written: February 8, 2019

Abstract

Banks, financial statement users, and accounting standard setters have long disagreed on the informativeness of banks’ statements of cash flows (SCFs) and there is a lack of relevant evidence in the literature. This paper examines the informativeness of the SCFs of U.S. commercial banks in two settings where SCFs are purported to be useful. The first analysis tests the incremental value relevance of banks’ SCFs beyond income statements and balance sheets and compares bank’s SCFs with those of industrial firms. We find that banks’ SCFs have limited incremental value relevance, and are much less value relevant than industrial firms’ SCFs. The second analysis examines and finds no distress-predictive power of banks’ SCFs, especially in the presence of standard distress predictors. Overall, our results are consistent with the view that banks’ SCFs have limited informativeness.

Keywords: statement of cash flows; banks; value relevance; distress prediction

JEL Classification: G21; M41

Suggested Citation

Gao, Zhan and Li, Weijia and O'Hanlon, John F., The Informativeness of US Banks' Statements of Cash Flows (February 8, 2019). Journal of Accounting Literature (2019), Available at SSRN: https://ssrn.com/abstract=2568762 or http://dx.doi.org/10.2139/ssrn.2568762

Zhan Gao

Lancaster University ( email )

Lancaster LA1 4YX
United Kingdom
44-1524-593-151 (Phone)

Weijia Li

Lancaster University Management School ( email )

Lancaster University
Management School
Lancaster, LA1 4YX
United Kingdom
44 (0)1524 593135 (Phone)

John F. O'Hanlon (Contact Author)

Lancaster University Management School ( email )

The Management School
Lancaster LA1 4YX
United Kingdom
+44 1524 593631 (Phone)
+44 1524 847321 (Fax)

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