The Effects of Accrual vs. Cash Flow Bases on Shareholder Value in Transitional Markets: Evidence from Egypt

Journal of Economic & Administrative Sciences, Vol. 20, No. 2, pp. 45-60, December 2004

16 Pages Posted: 10 Apr 2010

See all articles by Mohamed Hassan Abdel-Azim

Mohamed Hassan Abdel-Azim

United Arab Emirates University (UAEU)

Tarek Ibrahim Eldomiaty

American University in Cairo

Date Written: December 6, 2004

Abstract

This study examines the effects of the accruals vs. cash flow bases on firm’s MB ratio as a proxy for shareholder value. The methodology utilizes the benefits of the ‘partial adjustment model’ where it addresses the extent to which the shareholder value adjusts to a target level. The final results indicate that (a) the accrual basis helps adjust the shareholder value to a target level more than the cash flow basis, (b) the shareholder value is associated with profitability-related ratios and dividend-related ratios, (c) in both bases, the shareholders value is positively associated with earnings per share and price-to-earnings ratio, (d) the significant effects of firm-specific controls indicate that the shareholder value is affected by the accounting base in certain industries, certain size, and affected by the time as well. The results of the sensitivity analysis show that the accruals-based estimates and cash flow estimates are robust and reliable.

Suggested Citation

Abdel-Azim, Mohamed Hassan and Eldomiaty, Tarek Ibrahim, The Effects of Accrual vs. Cash Flow Bases on Shareholder Value in Transitional Markets: Evidence from Egypt (December 6, 2004). Journal of Economic & Administrative Sciences, Vol. 20, No. 2, pp. 45-60, December 2004, Available at SSRN: https://ssrn.com/abstract=1585483

Mohamed Hassan Abdel-Azim

United Arab Emirates University (UAEU) ( email )

P.O. Box 15551
Al-Ain, Abu Dhabi 00000
United Arab Emirates

Tarek Ibrahim Eldomiaty (Contact Author)

American University in Cairo ( email )

​AUC Avenue, P.O. Box 74 New Cairo 11835, Egypt
Management Department
Cairo, 11835
Egypt
+20226153361 (Phone)

HOME PAGE: http://https://www.aucegypt.edu/fac/tarek-ibrahim-eldomiaty

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