CEO'S Operating Ability and the Association between Accruals and Future Cash Flows

16 Pages Posted: 17 Jul 2015

See all articles by Wooseok Choi

Wooseok Choi

Korea University Business School

Sam Han

Korea University Business School

Sung Hwan Jung

University of Suwon

Tony Kang

University of Nebraska - Lincoln

Date Written: June/July 2015

Abstract

This study investigates whether an individual CEO's operating ability, operationalized as the extent to which an individual CEO utilizes the company's assets efficiently to generate profits, explains the association between accruals and future cash flows. While this mapping can be driven by both the quality of accounting measurement and CEO operating ability, there is little empirical evidence on the latter link. After controlling for the CEO's accounting estimation ability, we find that the association between current period accruals and future cash flows is stronger when the CEO demonstrates superior operating ability. This suggests that a CEO's operating ability is an important determinant of the informativeness of current accruals for future cash flows.

Keywords: CEO's operating ability, CEO's accounting estimation ability, Accruals, Future cash flows

Suggested Citation

Choi, Wooseok and Han, Sam and Jung, Sung Hwan and Kang, Tony, CEO'S Operating Ability and the Association between Accruals and Future Cash Flows (June/July 2015). Journal of Business Finance & Accounting, Vol. 42, Issue 5-6, pp. 619-634, 2015, Available at SSRN: https://ssrn.com/abstract=2631843 or http://dx.doi.org/10.1111/jbfa.12118

Wooseok Choi (Contact Author)

Korea University Business School ( email )

Anam-Dong Seongbuk-Gu
Seoul, 136-701
Korea
+82-2-3290-2814 (Phone)

Sam Han

Korea University Business School ( email )

Anam-Dong 5 Ga, Seongbuk-Gu
Seoul, 136-701
Korea, Republic of (South Korea)
+82-2-3290-2839 (Phone)

Sung Hwan Jung

University of Suwon ( email )

Suwon-City, Gyeonggi
United States

Tony Kang

University of Nebraska - Lincoln ( email )

307 College of Business Administration
Lincoln, NE 68588-0488
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
0
Abstract Views
1,698
PlumX Metrics