Impact of Accounting Conservatism on Differential Information Content of Cash Flows and Accruals

Document Type : Research Paper



The subject concerning relationship between conservatism and information content of accruals relative to operating cash flows has been focused by many researchers. Felltham & Ohlson (1995) showed that the information content of accruals will increase conservatism, whereas the information content of cash flows remains unaffected. We predict that the score of conservatism of the firm has effect on their information content of accruals and cash flows, and firms with a high degree of conservatism have greater information content of accruals. This study is trying to collect evidence on this issue. To test the hypotheses in this study, two statistics methods for cross-section and panel data analysis have been used with financial information of 92 firms in Tehran Stock Exchange during 1999-2007. The results show that accruals and differential information content of cash flows relative to accruals for the firms exhibiting a high degree of conservatism is greater than that of the firms showing a low degree of conservatism. Also, there is a positive correlation between the differential information content of cash flows relative to accruals and conservatism score of firms.


- خدادادی، ولی و حسین عرفانی، (1389)، بررسی رابطه بین نوع صنعت، سهم بازار و فشردگی سرمایه با پایداری سود‌های غیرعادی در شرکتهای بورسی، دانش حسابداری، شماره 1، ص 89 تا 110.
- رضازاده، جواد و عبدالله آزاد، (1387)، رابطه‌ بین عدم تقارن اطلاعاتی و محافظه‌کاری در گزارشگری مالی، بررسیهای حسابداری و حسابرسی ، دوره 15 ، شماره 54 ، ص 63 تا 80 .
- عرب‌مازار یزدی، محمد، (1374)، محتوای افزاینده اطلاعاتی جریانهای نقدی و تعهدی، پایان نامه دکتری، دانشگاه تهران: دانشکده مدیریت.
- عرب‌مازار یزدی، محمد‌، بیتا، مشایخی و افسانه رفیعی، (1385)، محتوای اطلاعاتی جریانهای نقدی و تعهدی در بازار سرمایه ایران، بررسیهای حسابداری و حسابرسی، سال سیزدهم، شماره 43، ص 118-99.
- کردستانی، غلامرضا و حبیب امیر بیگی لنگرودی. ( 1386 ). محافظه‌کاری در گزارشگری مالی: بررسی رابطه عدم تقارن زمانی سود و MTB به عنوان دو معیار ارزیابی محافظه‌کاری، بررسیهای حسابداری و حسابرسی، دوره 15 شماره 52، ص89 تا 106.
- Arthur, N., Czernkowski, R., and Huynh, T.(2009).The Impact of Cash Flows and Accruals on Belief Asymmetry. The University of Sydney,
- Attar, A. and Hussein, S. (2004). Corporate Data and Future Cash Flows. Journal of Business, Finance & Accounting, Vol. 31, No. 7 & 8, pp. 861-903.
- Ashiq, Ali (1994). The Incremental Information Content of Earnings, Working Capital from Operation and cash flow, Journal of Accounting Research, Vol. 32, No. 1.
- Basu, S.(1997). The Conservatism Principle and the Asymmetric Timeliness of Earnings, Journal of Accounting and Economies, Vol. 24, pp. 3-37.
- Bowen, R., Burghstahler, D. and Daley, L. (1987). The Incremental Information Content of Accruals versus Cash Flows. The Accounting Review, Vol. 62, pp. 723-747.
- Coelho, A., Augier, A. and Lopes, A. (2008). Relationship Between Abnormal Earnings Persistence, Industry Structure, And Market Share In Brazilian Public Firms. Universidad de Sao Paulo, Brazil Manchester Business School.
- Dechow, P. and Dichev, I. (2002).The Quality of Accruals and Earning: The Role of Accruals in Estimation of Errors Accounting Review, Vol. 77, pp. 35-59.
- Gary C. B., Gim, S. S. and Andrew, F. S. (1995). Relative versus Incremental Information Content, Contemporary Accounting Research, Vol. 12, No. 1-1, pp.1-23.
- Han, Y., Taylor, S. and Walter, T. (2008).The Uncertainty of Non Accounting Information in Analysts' Forecasts and Stock Return Volatility. University of New South Wales, Sydney, NSW, pp. 20-52.
- Haw, I. M., Qi, D. and Wu, W. (2001). The Nature of Information in Accruals and Cash Flows in an Emerging Capital Market: the Case of China. International journal of Accounting, Vol. 36, pp. 391-406.
- Kumar, K. R. and Krishnan, G. V. (2008). The Value- Relevance of Cash Flows and Accruals: The Role of Investment Opportunities. The Accounting Review, Vol. 83, No. 4, pp. 997-1040.
- Lev, B. and Nissim, D. (2004). The Persistence of the Accruals Anomaly, Working Paper, pp. 1-37, www.
- Lin, M. L. and Fu, C. J. (2008). The Effect of Non Accounting Information on Equity Valuation Model. Oxford Business & Economics Conference Program.
- Michael, F. P. (2001). The Impact of Accounting Conservatism on The Differential Information Content of Cash Flows and Accruals. Online ,
- Milan, J. A. (2008). The Relative Information Content of Guidance and Earnings, pp. 1-35 .Online,
- Peixoto, S. (2000). Economic Value Added: Application to Portuguese pubic, Accounting journal of Portuguese Vol. 3, pp. 25-40.
- Subramanyam, K. R. (1996). The Price of Discretionary Accruals. Journal of Accounting and Economics, Vol. 22, pp. 249-281.
- Watts, R., (2003). Conservatism in Accounting part I: Explanations and implications. Accounting Horizons, Vol. 17, No. 3, pp. 207- 222.
- Wilson,G. P.(1986). The Relative Information Content of Accruals and Cash Flows: Combined Evidence at the Earning Announcement and Annual Report Release Date, Journal of Accounting Research, Vol. 24, pp. 165-203.
- Wilson, G. P. (1987). The Incremental Information Content Of Accrual And Funds Components Of Earnings After Controlling Earnings. The Accounting Review, Vol. 62, pp. 293-323.
- Zhang, L. and Wang, S. (2006). Cash Flow from Operations, Accruals and Earnings Persistency. Journal of Modern Accounting and Auditing, Vol. 2, No. 6, pp. 10-15.