HOW WELL DOES COMPREHENSIVE INCOME MEASURE FUTURE FIRM PERFORMANCE COMPARED TO NET INCOME? EVIDENCE FROM TURKISH LISTED FIRMS

Abstract

The financial performance of the firms is one of the major concerns for the users of financial statements. Accounting standard setting bodies have encouraged firms to report comprehensive income which is believed to have much more value relevant information than traditional net income. The objective of this paper is to assess the usefulness of comprehensive income and net income in explaining future firm performance. Based on a sample that includes 102 non-financial firms, the empirical analysis indicates that there are advantages of reporting comprehensive income in predicting corporate financial performance. According to the empirical evidences, net income is better than comprehensive income in predicting future net income and operating income, while comprehensive income is better than net income in predicting future return on assets and return on equity.