Do Stock Prices Fully Reflect Information in Accruals and Cash Flows About Future Earnings?

THE ACCOUNTING REVIEW, Vol 71, No 3, Spring 1996

Posted: 5 Jul 1998  

Richard G. Sloan

University of Southern California - Leventhal School of Accounting; University of California, Berkeley - Accounting Group

Abstract

This paper investigates whether stock prices reflect information about future earnings contained in the accrual and cash flow components of current earnings. The extent to which current earnings performance persists into the future is shown to depend on the relative magnitudes of the cash and accrual components of current earnings. However, stock prices are found to act as if investors "fixate" on earnings, failing to fully reflect information in the accrual and cash flow components of current earnings until it impacts future earnings.

JEL Classification: M41, G14

Suggested Citation

Sloan, Richard G., Do Stock Prices Fully Reflect Information in Accruals and Cash Flows About Future Earnings?. THE ACCOUNTING REVIEW, Vol 71, No 3, Spring 1996. Available at SSRN: https://ssrn.com/abstract=2598

Richard G. Sloan (Contact Author)

University of Southern California - Leventhal School of Accounting ( email )

Los Angeles, CA 90089-0441
United States

University of California, Berkeley - Accounting Group ( email )

Haas School of Business
Berkeley, CA 94720
United States

Register to save articles to
your library

Register

Paper statistics

Abstract Views
11,235
PlumX