Persistence of Accounting Information in Regulated and Unregulated Firms in the Brazilian Economy

The persistence and predictive ability are extensively requested as desirable attributes of earnings quality in the literature. The paper aims at investigating the persistence and predictive ability of earnings in French and UK companies. The study included a panel data of 1035 firm-year observations for 115 French listed companies from the CAC All-Tradable and 900 firm-year observations for 100 UK listed companies from the FTSE All-Share, during the period of 2011–2019. The research design was based on two equations starting from Sloan (1996) that were estimated using Fixed Effects Method. The study showed that earnings were persistent but they had no predictive ability regarding the future cash flows whether in French or UK companies and that earnings of UK companies were more persistent than those of the French companies. We argue that the persistence of earnings and the inability to predict future cash flows can be evidence of earnings management. The study contributes to the literature about earnings quality by studying earnings persistence and earnings predictive ability together in two different environments. The results require that users must take into consideration the illusory persistence of earnings, auditors must be cautious regarding the manipulation of earnings by managers, and accounting standard setters must review the reporting guidelines of cash flows to enhance their predictability by earnings.

This study aims to determine the effect of book tax differences and cash flow on earnings persistence. The population in this study is a manufacturing company listed on the Indonesia Stock Exchange 2010-2015. Sampling technique in this research is done by purposive sampling method. Pursuant to purposive sampling method, sample obtained counted 24 company. The type of this research is associative research using quantitative method. The analytical method used to test the influence of book tax differences and cash flow to earnings persistence is multiple regression method with the help of software SPSS version 22. The results showed that partially, permanent differences significantly negatively affect earnings persistence, temporary differences negatively significant effect on persistence Profit, and cash flow have a significant positive effect on earnings persistence. The results of the study simultaneously show that if the permanent differences, temporary differences and cash flows have a significant effect on earnings persistence. Keywords: Permanent Differences, Temporary Differences, Cash Flow, Earnings Persistence

This paper examines the properties of accruals, cash flows and earnings in firm listed on Tehran Stock Exchange(TSE). Using a sample of 135 firm through 1383 to 1387(675 firm-year observations). Firm-years are ranked and assigned in equal numbers to the ten deciles. Decile 1 contains firms with extreme negative accruals (extreme positive cash flows) and decile 10 includes firms with extreme positive accruals (extreme negative cash flows) We define ROA as operating earning, and accruals and cash flows are scaled by total assets too, as to control variables for firm scale. We start from three hypotheses about persistence of earnings and its components. First we find that the persistence of earnings is more than cash flows in high accruals Second the persistence of earnings is more than cash flows in low accruals And third after decomposing ROA into cash flows and accruals, the cash flow component of earning is more persistent than the accrual component of earnings

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.

- This research explains the factors that influence earnings persistence including company size, operating cash flow, ownership structure, and debt level. Earnings persistence is important for both investors and companies because it can reflect a company's ability to manage its assets effectively and generate profits in the future. This paper analyzes earnings persistence in the largest companies by market capitalization. This research uses a purposive sampling method and multiple linear regression for data analysis. This study finds that firm size has no significant influence on earning persistence, operating cash flow has a significant positive influence on earning persistence, ownership structure has a significant positive influence on earning persistence, DER has no significant negative influence on earning persistence. This study concludes that a company that has supported affiliations companies and sufficient operating cash flow tend to generate earnings persistent. Keywords: Cash Flow; Debt Level; Earnings; Ownership; Size.

This quantitative study aims to examine the impact of operating cash flow on earnings persistence, considering debt level as a moderating variable. Additionally, the study investigates the influence of firm size on earnings persistence, also with debt level as a moderating variable. The research employs Moderated Regression Analysis (MRA) using SPSS software. Classical assumption tests, including normality, multicollinearity, autocorrelation, and heteroscedasticity tests, are conducted prior to MRA. The findings align with previous research, indicating that debt level does not moderate the relationship between firm size and firm value. These results contribute to the understanding of the dynamics between operating cash flow, firm size, earnings persistence, and debt level, providing insights for financial decision-makers in managing and interpreting financial performance indicators.
 Highlights:
 
 This quantitative study examines the influence of operating cash flow on earnings persistence, with debt level as a moderating variable.
 It also investigates the impact of firm size on earnings persistence, with debt level as a moderating variable.
 The research utilizes Moderated Regression Analysis (MRA) and conducts classical assumption tests to validate the findings. The results reveal that debt level does not moderate the relationship between firm size and firm value, contributing to the understanding of financial dynamics in organizations.
 
 Keywords: Operating cash flow, Earnings persistence, Debt level, Firm size, Moderating variable.

Quality earnings are earnings which may reflect the continuation of future earnings, which is determined by the components of accruals and cash flows. Book-tax differences may represent the management discretion in the accrual process to assess the quality of earnings. Persistence of earnings is one component of the predictive value of earnings and also the element of relevance that some information in the book-tax differences may affect the persistence of earnings. This study aims to examine the effect of large book-tax differences on the persistence of earnings, accruals and cash flows compared to firms with small book-tax differences and earnings persistence effect on investor expectations especially for the persistence of accruals on each sub-sample of book-tax differences. Object of study is a manufacturing company listed on the Stock Exchange in 2008-2009 with a sample of 37 manufacturing companies selected by purposive sampling technique. The results showed firms with large negative book-tax differences have persistence of the accrual component of earnings that are not much different from the firms with small book-tax differences and not proven that the stock price could reflect the persistence of earnings, accruals and cash flows but investors tend to be pessimistic about the current earnings in relation to future earnings in other words, earnings is considered to have low persistence for all sub-sample of book-tax differences.

This study examines the persistence of earnings performance, the contribution of accruals and cash flows in the persistence of earnings and whether investors correctly value the information contained in earnings, accruals and cash flows for equity pricing. We use data for 493 companies on the BSE from Jan 1997 to Dec2010. Results support the high persistence of earnings for the sample firms and that the stock prices correctly reflect the implications of current earnings for future earnings. We find that earnings persistence is more attributable to cash flows than accruals. However the Indian investors seem to under price accruals and overprice cash flows which is in contrast to findings for mature markets. Accruals are found to be positively associated with future returns. The accrual anomaly is not captured by one factor CAPM but is fully explained by the three factor Fama French model due to risk premium on the size factor. A negative relationship is reported between cash flows and returns which is again contrary to the results for mature markets. The cash flow anomaly which is not absorbed by CAPM is explained by the size and value factors of the Fama French model. Hence accruals and cash flow anomalies do not pose serious challenge to popular asset pricing models in the Indian context. Our findings shall be highly useful for investment analysts and portfolio managers who are in pursuit of trading strategies that promise extra normal returns. The research contributes to asset pricing and behavioural finance literature especially for emerging markets.

PurposeThe purpose of this study is to examine whether institutional investors monitoring attenuate (exacerbate) weaker earnings persistence in politically connected firms (PCFs). In addition, it investigates whether earnings persistence do vary according to different types of political connections.Design/methodology/approachThis study employs earnings persistence as measure of earnings quality and ordinary least squares (OLS) model to examine: (1) the moderating effect of institutional investors’ ownership on the association between earnings persistence and PCFs and (2) the association between different types of political connections and earnings persistence.FindingsThis study finds that institutional investors' ownership attenuates weaker earnings quality in PCFs, indicating effective monitoring. However, stronger earnings persistence is associated with PCFs with longer political ties, audited by big four audit firm and with higher CEO power.Originality/valueThis study reveals the lower earnings persistence in PCFs can be attenuated by institutional investors monitoring. However, findings also suggest that earnings persistence in PCFs is affected by duration of political ties, big four audit firm and CEO power. This suggests that PCFs should not be viewed as a homogeneous group of firms.

A survey of geriatric expertise in medicines evaluation at national regulatory agencies in Europe: There is still room for improvement!

This research aims to present an empirical investigation of the relative and incremental predictive ability of alternative accrual- and cash-based accounting measures to forecast future cash flows in an Australian context. To achieve this goal, eight ordinary least squares (OLS) regression models on pooled time-series of cross-sectional data are developed. To evaluate the forecasting performance of the models, both within-sample and out-of-sample forecasting tests are employed. A number of contextual factors, including the length of the operating cash cycle, industry membership, firm profitability and firm size, were taken into account in the main OLS regression analysis of this study to examine whether the predictive ability of accrual- and cash-based data to forecast future cash flows were influenced by these factors. In addition, a more sophisticated approach used for estimating regression models, namely fixed-effects, is undertaken to control for unobseved differences across firms. Results from various regression model analyses suggest that cash flow from operations is more important than earnings in predicting future cash flows. Disaggregating earnings into cash flow from operations and accruals enhances the forecast of future cash flows, compared with aggregate earnings. The accrual component of earnings provides incremental information content for future cash flows beyond that provided by the cash flow component of earnings. Various decompositions of total accruals (i.e., current and non-current accruals, accrual components, and discretionary and nondiscretionary accruals) have incremental information content beyond that contained in total accruals. Disaggregating cash flow from operations into operating cash receipts and payments, as reported under the direct method of cash flow presentation, improves the predictive ability of aggregate cash flow from operations. Indirect cash flow information incrementally enhances the ability of direct cash flow components in forecasting future cash flows. This study also provides evidence that the model based on both accrual and cash flow components outperforms other existing cash flow prediction models. Various categorisations of the sample confirm that the findings are not conditional on the selected control factors. However, the results reveal new knowledge on the characteristics of accrual- and cash-based accounting data relating to future cash flows. For instance, this study documents that cash flow and its components (earnings and accruals) are more (less) informative to market participants in the forecast of a firm’s future cash flows when: (i) the firm is small; (ii) their operating cash cycle is short; and (iii) the firm makes a loss. Furthermore, the level of the predictive ability of both accrual- and cash-based accounting variables varies across industries.

I investigate the role of book-tax differences in indicating the persistence of earnings, accruals and cash flows for one-period-ahead earnings. I also examine whether the level of book-tax differences influences investors' assessments of future earnings persistence. I find that firm-years with large book-tax differences have earnings which are less persistent than firm-years with small book-tax differences. Further, the evidence is consistent with investors interpreting large positive book-tax differences (book income greater than taxable income) as a red flag and reducing their expectation of future earnings persistence for these firm-years. However, for firm-years with large negative book-tax differences (book income less than taxable income), investors overestimate the persistence of the accrual component of earnings, consistent with prior research (e.g., Sloan 1996). Finally, analyst forecast data provide evidence consistent with analysts utilizing the information in the book-tax differences in a manner similar to investors: forecast errors for firm-years that have large positive book-tax differences are less optimistic.

I investigate the role of book-tax differences in indicating the persistence of earnings, accruals, and cash flows for one-period-ahead earnings. I also examine whether the level of book-tax differences influences investors' assessments of future earnings persistence. I find that firm-years with large book-tax differences have earnings that are less persistent than firm-years with small book-tax differences. Further, the evidence is consistent with investors interpreting large positive book-tax differences (book income greater than taxable income) as a “red flag” and reducing their expectation of future earnings persistence for these firm-years. I then investigate potential sources of the lower persistence for firm-years with large book-tax differences. I find that special items contribute in part to the results but that firm-years with large booktax differences continue to have lower persistence in earnings after controlling for the effect of the special items.

Purpose: This study aims to find empirical evidence of the influence of variables consisting of earnings persistence, free cash flow and accrual components of cash flows on operating activities in the future. Research methodology: The objects used in this study were manufacturing companies listed on the Indonesia Stock Exchange for 5 years (2013-2017). The study population consisted of 135 manufacturing companies listed on the Indonesia Stock Exchange. The sample selection technique used was purposive sampling, and the sample was 100 companies. Data were analyzed using the EVIEWS 9 program with the panel data regression analysis type. Results: The study finds that earnings persistence, free cash flow and accrual components of changes in account payable partially have a positive effect on cash flows from future operating activities, while the accrual component of changes in trade receivables and the accrual component of inventory changes partially do not have influence on cash flow from operating activities. Limitations: The limitation of this study was that manufacturing companies do not cover all company sectors listed on the Indonesia Stock Exchange. In addition to the data used in the study, only 5 years of annual financial reports were reported by each company to the Indonesia Stock Exchange Contribution: This research can be used by stakeholders, especially investors and creditors to assess the future prospects of a company through variables that have been tested which can affect cash flow from the future production activities by the company. Keywords: Cash flow from operating activities, Earnings persistence, Free cash flow, Accrual components

This study aims to analyze the impact of operating cash flow volatility (Cash Flow Volatility), sales volatility (Sales Volatility), and deferred tax expense (Deferred Tax Expense) on earnings persistence in property and real estate sector companies listed on the Indonesia Stock Exchange (IDX) for the period 2021-2023, with financial leverage as a moderating variable. The method used is multiple linear regression with a moderation test to test the direct and moderating effects of leverage on the relationship between variables. The results of the study indicate that sales volatility (Sales Volatility) has a significant negative effect on earnings persistence, while deferred tax expense (Deferred Tax Expense) has a significant positive effect. On the other hand, operating cash flow volatility (Cash Flow Volatility) does not show a significant effect. Although the moderating variable (leverage) does not directly moderate the relationship between the independent variables and earnings persistence, the presence of leverage strengthens the overall regression model, as evidenced by the increase in the R² value from 53.8% to 58.5%. This study provides insights into the importance of managing cash flow and sales volatility and the impact of deferred tax expense on corporate earnings performance, as well as the importance of taking leverage into account in improving the predictive power of financial models.