Comparing Relative and Additive Contents of Return with Cash Recovery Rate

Document Type: Research Paper

Authors

1 Department of Management, University of Tehran, Tehran, Iran

2 Department of Accounting, Islamic Azad University, Arak Branch, Arak, Iran

Abstract

One of the goals of financial reporting is to provide the useful information in order to facilitate the decision making. Accounting information system is of high importance for the users to make specific decisions. The information should be analyzed to present the valuable information to the investors so that in this paper, the relative content and return additive with cash recovery have been addressed in the corporates of Tehran Stock Exchange. This research population includes the accepted corporates by Tehran Stock Exchange during a five year period
(2010-2014). Finally, considering the research limitations and using the
systematic deletion method, the information related to 109 corporates has been gathered and with respect to the defined goals, this research is regarded as an applied one. In terms of the research design, it is an event one because of
background data and its deduction method is an induction and correlation one. Current study involves a primary hypothesis and six secondary hypotheses; here, a linear regression method has been used to examine the hypotheses. In order to analyze the data and test the research hypotheses, the software Eviews has been utilized.

Keywords


[1] Amal A. Said, H. Hassab Elnaby, R., Nowlin, T.S, The relative and incremental information content of earnings vs cash recovery rates, Review of Accounting and Finance, ,2008,7(4), P.372 – 395.

[2] Arab MziarYazdi, M, Mashayekhi, B; Rafiee, A, Information Content of Commited and Cash Flows in Iran Capital Market, Auditing and Accounting Researches,2006, 4(3), P. 99-118.  

[3] Babajani, J, Accounting of Governmental Controls, AlameTabatabaee University, Tehran.

[4] Barth, M.E., Cram, D. and Nelson, K, Accruals and the prediction of future cash flows, The Accounting Review,2011, 7(6), P. 27-58.

[5] Beaver, W. H., McNichols, M. F., & Wang, Z. Z, The Information Content of Earnings Announcements: New Insights on Intertemporal and Cross-Sectional Behavior. ‏2016.

[6] Belkaoui,A, The information Content OF Value added, earning and cash Flow: US evidences, International Journal Of Accounting , 2016, 2(2),P.140.

[7] Brown, S., Lo, K. and Lys, T, Use of R2 in accounting research: measuring changes in value relevance over the last four decades, Journal of Accounting and Economics,2015, 2(8), P. 83-115.

[8] Chen, K. C. W. and Lee, C. W. J. Accounting Measures of Business Performance and Tobin’s Q Theory, Journal    of Accounting, Auditing and Finance,1995, 10(3), P.587-609.

[9]   Dechow, P.M. Accounting earnings and cash flows as measures of firm performance: the role of accounting accruals, Journal of Accounting and Economics,2011, 18(1), P. 3-42.

[10] DeFond, M.L. and Hung, M. An empirical analysis of analysts’ cash flow forecasts, Journal of Accounting and Economics,2010, 3(5), P. 73-100

[11] Griner, E. H. and Stark, A. W, Cash Recovery Rates, Accounting Rates of Return and The Estimation of Economic Performance, Journal of Accounting and Public Policy,1988, 7(4), P.293–312.

[12] Hosseinvand, Q, Karimi, F, Investigating Relative and Additive Information Contents of Return as Compared to Cash Recovery Rate, 2010,9(1), P, 97-122.

[13] Ijiri, Y. Recovery Rate and Cash-Flow Accounting, Financial Executive,2010, 4(8), P.54-60.

[14] Jacobson, R. The validity of ROI as a measure of business performance, American Economic Review,2010, 77(3), P. 470-78.

[15]   KhodaparastShirazi, J, Talebnia, Q, Mosalanejad, T, Relative and Additive Information Contents of Return as Compared to Cash Recovery Rate for Corporate Performance Evaluation, Financial Accounting Research Journal,2012, 14(1), P. 1-22

[16]   Liu, J., Nissim, D. and Thomas, J, Cash flow king in valuations? Financial Analysts Journal, 2011,6(3), P. 56-68.

[17] Livnat, J. and Santicchia, M., Cash flows, accruals, and future returns, Financial Analysts Journal,2009, 6(2), P. 48-61.

[18] Milian, J. A. The information content of guidance and earnings. European Accounting Review,2016, P. 1-24. ‏

[19] Ng, J., Tuna, I., & Verdi, R, Management forecast credibility and under reaction to news. Review of Accounting Studies,2013, 18 (4), P.956–986.

[20] Noroosh, I, Mashayekhi, B, Additive Information Content of Economic Added Value and Cash Added Value vs. Accounting Return and Cash Flows of Operations, Financial Research Journal,2004, 1(7), P. 131-150.

[21] Ou, J. The Information Content of Non-earnings Accounting Numbers as Earnings Predictors, Ph. D. dissertation, University of California, Berkeley.1986.

[22] RahnamayeRoodposhti, F, Cash Recovery and Accounting Rates, Accountant Journal, 2001,14(3), P. 23-26.

[23] Salminen,M. &Martikainen,J, Abnormal Returns of Dividend Announcements during a Boom and a Recessio, Lappeenranta University OF Technology, School of Business Finance.2008.

[24] Shabahang, R, Accounting Theories, Ed. 7th, Auditing and Accounting Researches Center Press,2008, 1(2). P.44-96.

[25] Subramanyam, K.R. and Venkatachalam, M., Earnings, cash flows, and ex post intrinsic value of equity, The Accounting Review, 2013, 82(2), P. 457-81.

[26] Wiersma, E, An exploratory study of relative and incremental information content of two non-financial performance measures: Field study evidence on absence frequency and on-time delivery, Accounting, Organizations and Society,2008.

[27] Wilson, G. P, The relative information content of accruals and cash flows: combined evidence at the earnings announcement and annual report release date. Journal of Accounting Research,1986, 24(5), P.165-203.