The Effects of the Predictive Ability of Accruals and Cash Flows on Earnings Quality: Evidences from TSE

The Effects of the Predictive Ability of Accruals and Cash Flows on Earnings Quality: Evidences from TSE

نویسندگان

چکیده

This paper examines the effects of the predictive ability of accruals and cash flows on earnings quality in Tehran Stock Exchange (TSE). In this study we have used two methods: cross-section and pooled for testing hypothesis. The results show that Sloan model has the strongest ability to predict future earnings, and cash component earnings have more ability than accruals component earnings for predicting future earnings. Also this study indicats that prediction quality of earnings components affects on future earnings. Also this paper shows that the ability prediction of future earnings and persistence of earnings (as two assessment criteria of earnings quality) increases when earnings contain a stronger predictive ability of the accrual component and/or a cash flow component but, earnings-returns relation (as an assessment criterion of earnings quality) not increases.

عنوان مقاله [English]

The Effects of the Predictive Ability of Accruals and Cash Flows on Earnings Quality: Evidences from TSE

نویسندگان [English]

  • Valli Khodadadi
  • Reza Janjani
چکیده [English]

This paper examines the effects of the predictive ability of accruals and cash flows on earnings quality in Tehran Stock Exchange (TSE). In this study we have used two methods: cross-section and pooled for testing hypothesis. The results show that Sloan model has the strongest ability to predict future earnings, and cash component earnings have more ability than accruals component earnings for predicting future earnings. Also this study indicats that prediction quality of earnings components affects on future earnings. Also this paper shows that the ability prediction of future earnings and persistence of earnings (as two assessment criteria of earnings quality) increases when earnings contain a stronger predictive ability of the accrual component and/or a cash flow component but, earnings-returns relation (as an assessment criterion of earnings quality) not increases.

کلیدواژه‌ها [English]

  • Earnings Quality
  • Components of Earnings
  • Accruals
  • Cash Flows.