Niclas Andrén
Head of the Department of Business Administration
Disappearing Investment-Cash Flow Sensitivities: Earnings Have Not Become a Worse Proxy for Cash Flow
Author
Summary, in English
According to a recent conjecture in the literature, earnings have become a poorer proxy for cash flow from operations over time. We find that since 1988, when cash flow statements started to be consistently reported in Compustat, the cash effectiveness of earnings has actually increased for a large sample of US manufacturing firms. This occurs despite the introduction of fair value accounting and increasing accounting accruals during the last three decades. Also contrary to the conjecture, using more comprehensive measures of cash flow does not restore the investment-cash flow sensitivity, which continues to be around 0.05 in more recent periods.
Department/s
- Department of Business Administration
Publishing year
2017
Language
English
Links
Document type
Conference paper
Topic
- Business Administration
Conference name
Financial Management Association Annual Meeting 2018
Conference date
2018-10-10 - 2018-10-13
Conference place
San Diego
Status
Published