"Is Cash Flow King in Valuations?"
©
Financial Analysts Journal,
March
2007
Volume: 63
|
Issue: 2
|
Pages: 56-68
Publication type: Journal article
Research Archive Topic: Accounting
Abstract
Contrary to the common perception that operating cash flows are better than accounting earnings at explaining equity valuations, recent studies suggest that valuations derived from industry multiples based on reported earnings are closer to traded prices than those based on reported operating cash flows. The question addressed in the article is whether the balance tilts in favor of cash flows when the following are considered: (1) forecasts rather than reported numbers, (2) dividends rather than operating cash flows, (3) individual industries rather than all industries combined, and (4) companies in non-U.S. markets. In all cases studied, earnings dominated operating cash flows and dividends.
Each author name for a Columbia Business School faculty member is linked to a faculty research page, which lists additional publications by that faculty member.
Each topic is linked to an index of publications on that topic.
Robert Bloomfield
"A Pragmatic Approach to More Efficient Corporate Disclosure"
Accounting Horizons
(2012)
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"Norms, Conformity, and Controls"
Journal of Accounting Research
(2011)
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"Disagreement and the Cost of Capital"
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(2011)
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Edwige Cheynel
"Analysts' sale and use of non-fundamental information"
Review of Accounting Studies
(2012)
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Fabrizio Ferri
"Say on Pay Votes and CEO Compensation: Evidence from the UK"
Review of Finance
(2013)
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"Reputation Penalties for Poor Monitoring of Executive Pay: Evidence from Option Backdating"
Journal of Financial Economics
(2012)
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"Shareholder Activism and CEO Pay"
Review of Financial Studies
(2011)
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Trevor Harris
"Discussion of 'The robustness of the Sarbanes Oxley effect on the U.S. capital market'"
Review of Accounting Studies
(2009)
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"Enterprise Valuation Roundtable"
Journal of Applied Corporate Finance
(2007)
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"FMA Roundtable on Stock Market Pricing and Value-Based Management"
Journal of Applied Corporate Finance
(2006)
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Sharon Katz
"Does Public Ownership of Equity Improve Earnings Quality?"
The Accounting Review
(2010)
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"Earnings Quality and Ownership Structure: The Role of Private Equity Sponsors"
The Accounting Review
(2009)
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Nahum Melumad
"Auditors' Liability, Investments and Capital Markets: An Unintended Consequence of Sarbanes-Oxley"
Journal of Accounting Research
(2012)
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"Line-item Analysis of Earnings Quality"
Foundations and Trends in Accounting
(2008)
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"Activity-Based Costing and Cost Interdependencies Among Products: The Denim Finishing Company"
Issues in Accounting Education
(2005)
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Doron Nissim
"Line-item Analysis of Earnings Quality"
Foundations and Trends in Accounting
(2008)
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"Is Cash Flow King in Valuations?"
Financial Analysts Journal
(2007)
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"Managerial Discretion and the Economic Determinants of the Disclosed Volatility Parameter for Valuing ESOs"
Review of Accounting Studies
(2007)
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Stephen Penman
"Accounting for Revenues: A Framework for Standard Setting"
Accounting Horizons
(2011)
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"Accounting for Risk and Return in Equity Valuation"
Journal of Applied Corporate Finance
(2011)
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"Accounting for Value"
The European Financial Review
(2011)
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Gil Sadka
"Earnings Dispersion and Aggregate Stock Returns"
Journal of Accounting and Economics
(2012)
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"Predictability and the Earnings-Returns Relation"
Journal of Financial Economics
(2009)
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"Liquidity and the Post-Earnings-Announcement Drift"
Financial Analysts Journal
(2009)
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Julian Yeo
"The Use of Comparable Firm Approach in Valuing Australian IPOs"
International Review of Financial Analysis
(2007)
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"The Impact of Forecast Disclosure and Its Accuracy on Equity Pricing: The IPO Perspective"
Journal of Accounting, Auditing and Finance
(2001)
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"The Pricing of Underwriting Services in the Australian Capital Market"
Pacific-Basin Finance Journal
(2000)
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Amir Ziv
"Intertemporal Dynamics of Corporate Voluntary Disclosures"
Journal of Accounting Research
(2008)
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"Unbalanced Information and the Interaction between Information Acquisition, Operating Activities and Voluntary Disclosure"
The Accounting Review
(2007)
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"Activity-Based Costing and Cost Interdependencies Among Products: The Denim Finishing Company"
Issues in Accounting Education
(2005)
More | View research