The Role of Earnings and Cash Flows Extremity on Relative Information Content of Earnings and Cash Flow on Companies listed in Tehran Stock Exchange

Soroushyar, Afsaneh; Ahmadi, Saied Ali; Marateb, Fahimeh

The Role of Earnings and Cash Flows Extremity on Relative Information Content of Earnings and Cash Flow on Companies listed in Tehran Stock Exchange

Document Type : Original Article

Authors

Afsaneh Soroushyar

Saied Ali Ahmadi

Fahimeh Marateb

Department of Accounting, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran

Abstract

The purpose of this paper is to investigate the relative information content of earnings and cash flows with regard the concept of earnings and cash flows extremity. In this research total data of firm-year are classified to four groups in terms of moderate or extreme of earnings and cash flows and the relative information content of earnings and cash flows are examined for total data and separately for each group. In this research in order to test the hypothesis, multiple regression and voung test are used. The population of research is companies listed in Tehran Stoke Exchange and the sample is including 118 companies in the period of 2005 to 2014. The research results indicate that for total sample the relative information content of earnings is higher than that of cash flows from operations. But after controlling the extremity of earnings and cash flows, only the relative information content of moderate earnings is higher than that of extreme cash flows from operations.

Keywords

Relative Information Content

Extreme Earnings

Moderate Earnings

Extreme Cash Flows

Moderate Cash Flows