The Effects of Operating Cash Flow Disclosure on Earnings Comparability, Analysts’ Forecasts, and Firms’ Investment Decisions during the Pre-IFRS Era

61 Pages Posted: 9 Jun 2020

See all articles by Maria T. Caban-Garcia

Maria T. Caban-Garcia

University of South Florida, St. Petersburg Campus

HEEICK CHOI

University of Massachusetts Lowell

Myungsun Kim

SUNY at Buffalo

Date Written: December 1, 2019

Abstract

We examine the effects of the availability of operating cash flow (OCF) information disclosed by firms operating in 15 international countries during the pre-IFRS era on: (1) the comparability of these firms’ disaggregated earnings to those of U.S. firms for equity valuation purposes, (2) the properties of analysts’ earnings forecasts, and (3) the efficiency of firms’ investment decisions. We find that the comparability of disaggregated earnings improves after company-disclosed OCF information is available. We also find decreases in analysts’ forecast errors and dispersion and a decrease in firms’ tendency to over- or under-invest when they are predisposed to do so.

Keywords: earnings comparability, disaggregated earnings, cash flow statement, properties of analysts’ earnings forecasts, investment efficiency

JEL Classification: M41, G15

Suggested Citation

Caban-Garcia, Maria T. and CHOI, HEEICK and Kim, Myungsun, The Effects of Operating Cash Flow Disclosure on Earnings Comparability, Analysts’ Forecasts, and Firms’ Investment Decisions during the Pre-IFRS Era (December 1, 2019). British Accounting Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3599496

Maria T. Caban-Garcia

University of South Florida, St. Petersburg Campus ( email )

Lynn Pippenger School of Accountancy
140 Seventh Avenue South, LPH 319H
St. Petersburg, FL 33701
United States
727-873-4561 (Phone)
727-873-4571 (Fax)

HOME PAGE: http://https://www.usf.edu/business/about/bios/caban-garcia-maria.aspx

HEEICK CHOI

University of Massachusetts Lowell ( email )

1 University Ave
Lowell, MA 01854
United States

Myungsun Kim (Contact Author)

SUNY at Buffalo ( email )

Buffalo, NY 14260
United States
716-645-7900 (Phone)

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