Market valuation of accrual components
Accountancy valuations, Cash flow, Equity capital, Market value
Review of Accounting and Finance
Purpose The purpose of this paper is to generate empirical evidence that facilitates our understanding of the market pricing for cash flows and accruals. Design/methodology/approach The study is empirical in nature, and utilizes and archival methodology. Findings The evidence in this study supports the primary hypothesis that the market valuations for the receivable accrual are greater than the valuations for other current accruals. Additionally, the results suggest that market valuations for cash flows are not monotonically greater than the valuations for accruals. Research limitations/implications Overall, the results of this study suggest that inferences about the market's valuation of cash flows and accruals must consider multiple sources of variation in a concurrent fashion. Practical implications Models for equity valuation used by financial analysts, institutional investors, etc. should allow the various components of accruals to act independently. Originality/value This study contributes to the literature by synthesizing various aspects of capital markets research in accounting to enhance our understanding of the role that cash flows and accruals maintain for equity valuation. © 2008, Emerald Group Publishing Limited
Original Publication Date
DOI of published version
Francis, Rick, "Market valuation of accrual components" (2008). Faculty Publications. 2434.