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Corporate Data and Future Cash Flows

Lookup NU author(s): Professor Simon Hussain


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This article examines the ability of current accounting data to explain future cash flows for UK firms, as disclosed under FRS1(1991). Rather than examining price data — from which cash flow implications have to be inferred — we follow the more direct approach used in several recent US studies, in which actual future cash flow data are examined. Specifically, our methodology is a development of the OLS regression framework employed by Barth et al. (2001). We provide a replication of their main OLS analysis, and then extend this to deal with fixed effects and time trends in the levels of cash flow data. Our study finds that the disaggregation of earnings into cash flows and accruals, generates superior explanatory power with regard to future cash flows.

Publication metadata

Author(s): Al-Attar A, Hussain S

Publication type: Article

Publication status: Published

Journal: Journal of Business Finance & Accounting

Year: 2004

Volume: 31

Issue: 7-8

Pages: 861-903

ISSN (print): 0306-686X

ISSN (electronic): 1468-5957

Publisher: Wiley-Blackwell Publishing Ltd.


DOI: 10.1111/j.0306-686X.2004.00560.x

Notes: Invited to present this paper at the internationally prestigious ACCA/ICAEW/ JBFA Special Capital Markets Conference, Bowness, May 2003. (I was unable to attend due to prior commitments).


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