Quarterly Earnings, Operating Cash Flow, and Accruals in Future Performance Assessment

Pimentel, Renê Coppe; Malacrida, Mara Jane Contrera

doi:10.1590/1807-7692bar2020190115

Cited by 4 publications

(1 citation statement)

References 47 publications

(113 reference statements)

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The empirical literature confirms these associations between cash and accruals components in non-financial firms under different economic contexts, showing that accruals, regardless of whether they are managed to produce a desired level of earnings or not, are less persistent than the cash flow components (Hui, Nelson, & Yeung, 2016;Lewellen & Resutek, 2019;Livnat & Santicchia, 2006;Pimentel & Malacrida, 2020). However, as a practical consequence of the higher persistence of the cash component compared to accruals, the economic fundamentals that drive firms' performance and accounting metrics are jointly informative about firms' future earnings (Hui et al, 2016).…”

Section: Earnings Persistence and Its Componentsmentioning

confidence: 70%

Earnings Persistence and Market Reaction to Earnings in the International Insurance Industry

Pimentel

2022

Rev. adm. contemp.

Self Cite

View full text Add to dashboard Cite

Objective: this paper analyses the earnings persistence and market reaction to earnings in the international insurance industry. Methods: the analysis considers a sample of 307 listed international insurance companies from 2004 to 2019 and assesses several quantitative empirical models and estimations, including panel fixed effects and pooled OLS. Results: results indicate that operating cash flows are highly and strongly persistent when compared to the accruals component of earnings and that reported earnings are informative about companies’ performance. However, these findings vary significantly across insurance sub-segments. Additionally, the association between earnings and returns is significantly affected by specific companies’ performances in the sense that market agents review their expectation in a higher level when a reduction in earnings (bad news) is reported. Results also show that market risk patterns are positively associated with earnings response coefficient, suggesting a numerator effect of risk. Conclusions: overall, this paper provides evidence that economic analysis and scrutiny of earnings persistence and the market reaction to earnings announcements in insurance industry, and its insurance sub-segments, can provide superior assessment of future outcomes by investors, regulators, and academics.

show abstract

Section: Earnings Persistence and Its Componentsmentioning

confidence: 70%

Earnings Persistence and Market Reaction to Earnings in the International Insurance Industry

Pimentel

2022

Rev. adm. contemp.

Self Cite

View full text Add to dashboard Cite

show abstract

The relationship between profitability and cash flow in Jordanian banks

Fawzi Shubita

2023

Banks and Bank Systems

View full text Add to dashboard Cite

The relevance of this study lies in the importance of the two variables – profitability and cash flow – for the financial performance of banks, as well as the unique characteristics of the Jordanian banking sector. The purpose of the study is to investigate whether there is a significant relationship between profitability and cash flow in Jordanian banks and to identify potential factors that influence this relationship. The study methods are to employ a quantitative research method, using financial data from Jordanian banks over a period (2008–2019), Granger causality tests are used to describe the link between cash flow and profitability. The study results show a significant link between profitability and cash flow in Jordanian banks. Specifically, the study finds that a one percent increase in cash flow results in a 0.27 percent increase in profitability. The Adj-R2 for the three cash flow models is 11.4%, 17.3%, and 20.4%, respectively. Conversely, the Adj-R2 for the three models’ earnings are 21.4%, 21.5%, and 22.3%, respectively. However, the magnitude of the link seems to be weaker in Jordanian banks compared to banks in other countries. The study concludes that cash flow from operating is an important factor in improving the profitability of Jordanian banks.

show abstract

Predictive value of accruals and the moderating role of company size: Empirical evidence from Jordan

Shubita

2021

Investment Management and Financial Innovations

View full text Add to dashboard Cite

The cash flow statement aids the management to ascertain the profitability and liquidity position of a company. One can understand from the cash flow statement how efficiently the company is paying its obligation in various forms of liability and expense. This study aimed to explore the ability of short-term accounting accruals to predict cash flows. The sample included 77 Jordanian companies listed between 2006–2019. Cash flows were measured by net operating cash flows, and short-term accounting accruals were expressed as: change in account receivable, change in accounts payable, change in inventories, and other accruals. The results demonstrated the ability of short-term accounting accruals to predict future cash flows. The relationship between future cash flows and the short-term accounting accruals was significant, except for its relationship to the change in accounts payable. However, the findings indicate that the size of the company has not moderated the relationship between accounting accruals and operating cash flow. The study recommends using other accounting items besides short-term accounting accruals, to improve their ability to predict future cash flows and use of control variables that can increase the predictive power of the study model, such as financial leverage and company size. AcknowledgmentsI would like to thank Amman Arab University for its great support, and for funding this study.

show abstract

Quarterly Earnings, Operating Cash Flow, and Accruals in Future Performance Assessment

Cited by 4 publications

References 47 publications

Earnings Persistence and Market Reaction to Earnings in the International Insurance Industry

Earnings Persistence and Market Reaction to Earnings in the International Insurance Industry

The relationship between profitability and cash flow in Jordanian banks

Predictive value of accruals and the moderating role of company size: Empirical evidence from Jordan

Contact Info

Product

Resources

About