(Springer, 2012) Arnedo Ajona, Laura; Lizarraga Dallo, Fermín; Sánchez Alegría, Santiago; Gestión de Empresas; Enpresen Kudeaketa; Gobierno de Navarra / Nafarroako Gobernua
The aim of this study is to determine whether accruals have information
value beyond that provided by isolated current cash flows for the prediction of future
cash flows. Using a sample of 4,397 Spanish companies (mostly privately held), we
estimate in-sample regressions of future cash flows on isolated current cash flows and
on accrual-based earnings. We then find that the out-of-sample prediction errors provided
by the accrual-based earnings model are significantly lower than those obtained
with the cash flows model. We also regress the decrease in prediction errors brought
about by the addition of accruals on a set of firm-specific circumstances where accounting
manipulation is expected. In all cases the decrease in prediction errors is significantly
affected in the hypothesized direction.
