Persistence of earnings and prediction of future cash flows: the role of timely recognition of bad news

Timely recognition of losses and expenses compared to revenues and increased values precipitates future expenses to match with current revenues. Thus, timely recognition of losses acts to reduce the persistence of earnings. However, it is expected that a more timely recognition of negative cash flows, as bad news, increase the power of earnings for predicting future cash flows. This study investigates the effects of the timely recognition of bad news (loss) versus the good news on the decrease of the persistence of earnings, and the effect of negative cash flows on forecasting future cash flows. In this study, two pooling type models and a panel type model have been used to estimate the persistence of earnings and cash flows. Seventy eight firms that were listed in the Tehran Stock Exchange during the period 2003–2010 were duly reviewed. The results of this research proved that the timely recognition of loss does not affect the persistence and the power of earnings for the purpose of forecasting future cash flows. The findings imply that conservatism does not distort persistence of earnings.

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Kemampuan Laba dan Arus Kas Operasi dalam Memprediksi Laba dan Arus Kas Masa Depan

E-Jurnal Akuntansi ◽

10.24843/eja.2018.v23.i01.p04 ◽

2018 ◽

pp. 80

Author(s):

Frans AP Dromexs Lumbantoruan ◽

I Gusti Ngurah Agung Suaryana

Keyword(s):

Cash Flow ◽

Stock Exchange ◽

Linear Regression Analysis ◽

Flow Property ◽

Multiple Linear Regression Analysis ◽

Cash Flows ◽

Future Earnings ◽

Analysis Technique ◽

Operating Cash Flow ◽

Future Cash Flows

This study aims to determine the ability of earnings and operating cash flows in predicting earnings and future cash flows. This research was conducted on property and real estate companies listed on the Indonesia Stock Exchange. The samples used by 20 companies with 40 observations. The sampling was done by nonprobability samplingmethod with purposive samplingtechnique. The analysis technique used is multiple linear regression analysis. Based on the result of the analysis, earnings influences in predicting future earnings. Likewise, earnings and operating cash flow have an effect in predicting future cash flows. However, operating cash flow is not influential in predicting future earnings. Keywords: profitability, cash flow, property

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The Influence of Future Cash Flow Predictions on Profits in Companies Listed on the Indonesia Stock Exchange

International Journal of Seocology ◽

10.29040/seocology.v2i1.19 ◽

2021 ◽

pp. 026-033

Author(s):

Titik Purwanti

Keyword(s):

Cash Flow ◽

Stock Exchange ◽

Cash Flows ◽

Net Income ◽

Purposive Sampling ◽

Future Cash Flow ◽

Operating Profit ◽

Food And Beverage ◽

Future Cash Flows

This research was conducted to determine the effect of future cash flow predictions on profits (gross profit, operating profit, and net income) in food and beverage companies listed on the Indonesia Stock Exchange. The method used in this research used purposive sampling with a population of food and beverage companies listed on the Indonesia Stock Exchange for the period 2016-2018. The samples in this research were 19 companies. The results obtained indicate that the operating profit variable has a partial effect on future cash flows, while the net income variable and the gross profit variable do not partially affect future cash flows. Simultaneously, gross profit, operating profit and net income have an effect on future cash flows.

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Good news media book in regional bad news year

Pacific Journalism Review – Te Koakoa ◽

10.24135/pjr.v13i1.894 ◽

2019 ◽

Vol 13 (1) ◽

pp. 211-212

Author(s):

Patrick Craddock

Keyword(s):

Papua New Guinea ◽

News Media ◽

National Development ◽

New Guinea ◽

Bad News ◽

Good News ◽

Journalism Education ◽

Media Ownership ◽

The Media

Media, Information and Development in Papua New Guinea is one of the most interesting books I have on Pacific media. It is a collection of different writers, some of whom are current or former journalists. Several of the authors have direct media links as staff working with the Divine Word University in Madang, a private Christian institution. For the uninitiated, the opening chapter gives an outline of the media landscape in PNG. Other chapters explore media ownership, journalism education and the role of media national development.

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The Association between Big 6 Auditor Industry Expertise and the Asymmetric Timeliness of Earnings

Journal of Accounting Auditing & Finance ◽

10.1177/0148558x0502000302 ◽

2005 ◽

Vol 20 (3) ◽

pp. 209-228 ◽

Cited By ~ 140

Author(s):

Gopal V. Krishnan

Keyword(s):

Cash Flows ◽

Bad News ◽

Economic Losses ◽

The Public ◽

Asymmetric Timeliness ◽

High Profile ◽

Timely Fashion ◽

Future Cash Flows ◽

Auditor Industry Expertise ◽

Industry Expertise

The accounting profession is facing a credibility crisis precipitated by the failure of several high-profile companies and the alleged failure of their auditors to detect and persuade their clients to recognize economic losses in earnings in a timely fashion. Investors, regulators, analysts, and the public are interested in identifying factors that enhance the timeliness of earnings, particularly about bad news. This study provides empirical evidence on one such factor—auditors' industry expertise. Using a large sample of clients of Big 6 auditors, this research examines the association between auditor industry expertise, measured in terms of an industry's share in the auditor's portfolio of client industries, and the speed with which publicly available bad news about future cash flows is recognized in earnings. The findings indicate that the earnings of clients of specialist auditors are more timely in reflecting bad news than earnings of clients of nonspecialist auditors. This finding is consistent with the notion that auditors' industry expertise moderates the tendency of auditees to delay the recognition of economic losses in earnings.

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Foreign Monitoring and Predictability of Future Cash Flow

Sustainability ◽

10.3390/su11184832 ◽

2019 ◽

Vol 11 (18) ◽

pp. 4832

Author(s):

Jaehong Lee ◽

Eunsoo Kim

Keyword(s):

Cash Flow ◽

Stock Exchange ◽

Predictive Ability ◽

Financial Statements ◽

Cash Flows ◽

Foreign Investors ◽

Future Cash Flow ◽

Flow Components ◽

Future Cash Flows

A company’s sustainability is generally determined by whether it is able to create a positive long-term cash flow. This paper investigates whether the predictive ability of cash flows and earnings in forecasting future cash flows differs depending on the foreign investors’ ownership. Based on firms listed in the Korea Stock Exchange market from 2000 to 2017, we find that earnings and cash flow components of financial statements enhance the predictability of future cash flow in the Korean stock market. Conversely, foreign investors showed a tendency to decide on investments based on operating cash flow instead of earnings when predicting future cash flow. These findings indicate that reliability towards earnings may fall since foreign investors’ concerns are on the prospects of earnings management. These results were strengthened by the addition of several more analyses including cluster analyses, consideration of information asymmetry and the chaebol governance.

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The intra-industry effects of chapter 11 filings: Evidence from analysts’ earnings forecast revisions

Corporate Ownership and Control ◽

10.22495/cocv9i4c2art7 ◽

2012 ◽

Vol 9 (4-2) ◽

pp. 262-268

Author(s):

Gary L. Caton ◽

Jeffrey Donaldson ◽

Jeremy Goh

Keyword(s):

Cash Flow ◽

Earnings Forecasts ◽

Cash Flows ◽

Bad News ◽

Earnings Forecast ◽

Market Reactions ◽

Forecast Revisions ◽

Stock Market Reactions ◽

Future Cash Flows

Shareholders suffer huge losses when firms they own file Chapter 11. Interestingly, even shareholders of rival companies experience statistically significant losses. We examine how the bad news associated with a bankruptcy filing is transferred to the filing firm’s rivals. Using revisions in analysts’ earnings forecasts as a proxy for changes in expected future cash flows, we find that after a bankruptcy filing the market revises downward its cash flow expectations for rivals. Regression analysis confirms a positive relation between changes in expected cash flow and stock market reactions. These findings are consistent with our hypothesis that bad news associated with bankruptcy filings are transferred to rivals through reductions in expected future cash flows

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INVESTIGASI EMPIRIS TERHADAP PERILAKU FREENDING DALAM REAKSI PASAR TERHADAP PUBLIKASI LABA GOOD NEWS DAN BAD NEWS

Jurnal Riset Akuntansi dan Keuangan ◽

10.21460/jrak.2005.11.109 ◽

2005 ◽

Vol 1 (1) ◽

pp. 1

Author(s):

Andreas Lako

Keyword(s):

Experimental Design ◽

Market Failure ◽

Empirical Investigation ◽

Stock Exchange ◽

Earnings Announcements ◽

Free Riding ◽

Bad News ◽

Good News ◽

Quasi Experimental ◽

Market Anomaly

This study purposes to investigate the free-riding behattior from stoek market actors in responding to the good and bad news earnings announcements. Theoreticolly, free-riding (and externality) behaviors are the source of market failure, which suggest that regulotion mry still be needed (Wolk et al. 2001; Scott, 2003). But, the empirical investigation with respect to the issue is still rare. Using the good and bad news earnings announcements of 1998-2000 from LQ45 firms listed at theJakarta Stock Exchange and a quasi-experimental design, the results show that there arefree-riding behaviorsfrom market actors in responding to the good news earnings announcements from treatment sample. However, this study fails to find the free-riding behaviors from market actors in responding to the bad news earnings onnouncernents. The study also finds a number of phenomena that reflected the market anomaly. For thefuture research, this study suggests to extend the samples ond periods of earnings announcements, as well as appty the theory and models of behavioral finance.Kata kunci: free-riding, good news, bad news, quasi experimentol, treafinent sample dut contrul sample.

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The limitless role of p53 in cell cycle machinery: Good news or bad news?

Cancer Biology & Therapy ◽

10.4161/cbt.5.9.3231 ◽

2006 ◽

Vol 5 (9) ◽

pp. 1090-1093 ◽

Cited By ~ 2

Author(s):

Paraskevi Vogiatzi ◽

Marco Cassone ◽

Giovanni Abbadessa ◽

Pier Paolo Claudio

Keyword(s):

Cell Cycle ◽

Bad News ◽

Good News ◽

Cell Cycle Machinery

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Accounting Conservatism and Incentives: Intertemporal Considerations

The Accounting Review ◽

10.2308/accr-52107 ◽

2018 ◽

Vol 93 (6) ◽

pp. 181-201 ◽

Cited By ~ 5

Author(s):

Jonathan C. Glover ◽

Haijin H. Lin

Keyword(s):

Accounting Conservatism ◽

Fine Tuning ◽

Bad News ◽

Good News ◽

Accounting System ◽

Task Setting ◽

Downward Bias ◽

Period Performance ◽

Second Period

ABSTRACT We study intertemporal incentive properties of conditional accounting conservatism. Conservatism has detrimental and beneficial properties. In our first model, conservatism introduces downward bias in the first period; any understatement of first-period performance is reversed in the second period. A conservative bias is not costly in the first period but instead is costly in the second period when a new manager may be rewarded for the performance of his predecessor. In an extension on learning, we illustrate a beneficial role of conservatism in fine-tuning incentives. In the second model, conservatism is modeled as recognizing effort-independent bad news early and good news late. Recognizing bad news early can be optimal because of intertemporal rent shifting, which improves incentives via an “incentive spillback.” We also study overlapping projects (a multi-task setting) in which an interior accounting system can be optimal to avoid making one of the overlapping projects an incentive bottleneck. JEL Classifications: D21; D74; D82; D86.

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Prediksi Arus Kas Masa Depan Melalui Persistensi Laba Dan Komponen Akrual

Firm Journal of Management Studies ◽

10.33021/firm.v3i1.384 ◽

2018 ◽

Vol 3 (1) ◽

pp. 49

Author(s):

Muhamad Safiq ◽

Andi Ina Yustina ◽

Karinna Firdiastella

Keyword(s):

Hypothesis Testing ◽

Stock Exchange ◽

Cash Flows ◽

Analysis Tool ◽

Manufacturing Companies ◽

The Future ◽

Alternative Test ◽

Future Cash Flows

This study aims to develop the beliefs and components of accruals related to the components that exist, at the same time in the Indonesia Stock Exchange (BEI). The data used in this research is panel data, from 2011 until 2015 with the number of companies as much as 58 manufacturing companies, totality of data in this industry as much as 290 data. Hypothesis testing in this research using OLS approach with analysis tool. Eviews 9. As for, the results of this study indicate that the persistence of positive spiders on the future, but the relevant accrual components that arise during this time. . Meanwhile, simultaneous does not reflect future cash futures. An alternative test resulted in a positive relationship to future cash flows, where responsibility would not happen to the future. Here, diseminahkan, donated by positive to the future.

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