VALUE RELEVANCE OF CASH FLOW PATTERN : EVIDENCE FROM LISTED NIGERIAN COMPANIES

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VALUE RELEVANCE OF CASH FLOW PATTERN....pdf (2.85 MB)

Date

2018-06-19

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Department of Accounting Nasarawa State University Keffi.

Abstract

The usefulness of accounting information to stock investors can be indicated by the relevance of such information. In literature this is operationalized by the value relevance of such information. Value relevance of accounting information seeks to determine if accounting information summarizes the information that is impounded in share prices. The primary objective of this paper was to determine if the pattern of cash flow is incrementally value relevant beyond bottom line information of earnings and book value. All analyses are conducted on a sample of Nigerian listed companies based on accounting and stock market data provided by the Nigerian Stock Exchange. The study starts with the standard value relevance within the Ohlson model, where share price is regressed on earnings and book value deflated by shares outstanding at year end. The later section of the paper examines the value relevance of pattern of each cash flow also utilizing a multiplicative interaction model, in which the value relevance of earnings and book value is conditional on the pattern of cash flow. The paper finds that earnings and book value are value relevant, but the pattern of cash flow is not incrementally value relevant beyond bottom line accounting information. The pattern of individual cash flow is found not be significant in association with stock prices.

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Keywords

Accounting Information, Earnings and Book value, Ohlson Model, Value Relevance

Citation

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https://keffi.nsuk.edu.ng/handle/20.500.14448/704

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