The Incremental Information Content of Earnings, Funds Flow and Cash Flow: The U.K. Evidence

Posted: 15 Sep 1999

See all articles by Ashiq Ali

Ashiq Ali

University of Texas at Dallas - Naveen Jindal School of Management

Peter F. Pope

Bocconi University; London School of Economics and Political Science

Date Written: September 1994

Abstract

This paper investigates the incremental information content of three accounting performance measures for U.K. firms: earnings, funds flow and cash flow. Based on tests of association using the most general specifications suggested by the recent literature incorporating time-varying parameters and a non-linearity in response coefficients, a pattern of consistent results emerges. All three performance measures have explanatory power for returns individually and the response coefficients on their unexpected components are positive. The results further show that earnings, funds flow and cash flow all have incremental information content.However, the response coefficients on the unexpected components are consistently positive across years only for earnings and funds flow.

JEL Classification: M41

Suggested Citation

Ali, Ashiq and Pope, Peter F., The Incremental Information Content of Earnings, Funds Flow and Cash Flow: The U.K. Evidence (September 1994 ). Available at SSRN: https://ssrn.com/abstract=5677

Ashiq Ali

University of Texas at Dallas - Naveen Jindal School of Management ( email )

800 West Campbell Road, SM41
Richardson, TX 75080-3021
United States
972-883-6360 (Phone)
972-883-6811 (Fax)

HOME PAGE: http://https://jindal.utdallas.edu/faculty/ashiq-ali

Peter F. Pope (Contact Author)

Bocconi University ( email )

Dept of Accounting
Milan, 20136
Italy

London School of Economics and Political Science ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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