Accounting and Auditing Studies

Accounting and Auditing Studies

Impact of Partitioning Accruals on their Ability to Forecast Future Firm Value

Document Type : Original Article

Authors
Morteza Khairi 1
Farzaneh Heidarpoor 2
1 Ph.D. Student in Accounting, Department of Accounting, Economy and accounting faculty , Central Tehran Branch, Islamic Azad University, Tehran, Iran
2 Prof ,Department of Accounting, Economy and accounting faculty, Central Tehran Branch, Islamic Azad University, Tehran, Iran
10.22034/iaas.2024.211393
Abstract
One of the most attractive peiece of  financial information that can be provided to economic actors and those who are present in capital markets is the data which are related to future value of companies because the holder of this type of information is able to achieve economic goals through planning and making appropriate decisions. Holder of such information in competitive sharemarkets  will be able to act better rather than  other competitors. Accruals are one of the most frequently used factors to predict the above items, the  role of accruals in explaining value of the company has long been proven. In the continuation of these researches, new researches seek to study the new aspects of this prediction capability and increase the accuracy of this type of predictions. The present study follows the effect of separating accruals based on their role in the cash flow alignment on their ability to predict future firm value. In this study, accruals will be divided into two categories: accruals whose cash flow will be created after their economic factor and the second category is accruals whose cash flow  preceedes before their cashmic factor. The idea was first mooted by Barth et al In 2016. A total of 184 companies listed on the Tehran Stock Exchange and OTC in the period 2007-2019 were surveyed. Finally, empirical evidence doesn’t confirm the main premise of the paper that the separation of accruals based on their role in cash flow alignment increases their ability to predict the company's earning and value in a large number of industries. According to what was mentioned, our results are not very consistent with the results of the research of Barth et al. (2016), which showed that the separation of accruals based on their role in the cash balance leads to an increase in their ability to explain and predict the value of  the company. It should be noted that the difference between the conditions of Tehran Stock Exchange and other capital markets in the world can play an important role in the results of this research.
Keywords
Accruals
Cashflows
Firm value
Economic factor
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Accounting and Auditing Studies
Volume 13, Issue 51
Autumn 2024
Pages 63-82