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The Relative Relevance Of Cash Flow And Accrual Information: A Multi-Method Approach, Divesh Sharma, Errol Iselin
The Relative Relevance Of Cash Flow And Accrual Information: A Multi-Method Approach, Divesh Sharma, Errol Iselin
Errol Iselin
This multi-method study reports the results of two complementary experiments investigating the relevance of cash flow and accrual information. A behavioural field experiment investigated differences in the accuracy of solvency assessments between commercial lending managers using cash flow information and those using accrual information. Results indicated that commercial lending managers using cash flow information made more accurate solvency assessments than managers using accrual information. Results of an archival quantitative modeling experiment complemented these results and indicated cash flow information had incremental information content beyond accrual information. Our results confirmed the decision-usefulness of cash flow information and supported the mandate of …
The Decision Usefulness Of Reported Cash Flow And Accrual Information In A Behavioural Field Experiment, Divesh Sharma, Errol Iselin
The Decision Usefulness Of Reported Cash Flow And Accrual Information In A Behavioural Field Experiment, Divesh Sharma, Errol Iselin
Errol Iselin
While recent capital market studies tend to reveal some information content in cash flows, their results may not be generalisable to other contexts such as the assessment of solvency. Mandated accounting standards on cash flow emphasise the relevance of cash flow data for assessing solvency. However, there is a paucity of research that specifically investigates this contention. Accordingly, this study investigates the decision usefulness of reported cash flow and accrual information in a behavioural field solvency assessment experiment. Using a two-group between-subjects field experiment design, bankers with at least three years corporate lending experience made solvency judgments using either cash …