Assessment of the comparative ability of accounting bases in predicting future cash flows : evidence from Nigeria
Ebiaghan Orits Frank
Purpose of the article: This study examines the comparative abilities of accrual-based and cash-based accounting information to predict future operating cash flows with particular focus on quoted Nigerian non-financial companies. Secondary data were utilized for the study and were extracted from published annual statements and accounts of eighty (80) quoted firms in Nigeria between 2005-2015. Methodology/methods: Data collected were statistically analysed with the aid of the Ordinary Least Square (OLS) regression method, correlation analysis, variance inflation factor (VIF) tests for multicollinearity, and the Breusch-Pagan/Cook Weisberg test for heteroscedasticity. 5% level of the test of significance was employed to measure the degree of statistical relationship between stated variables. Scientific aim: This research is aimed at empirically ascertaining, by means of available statistics, the comparative predictive abilities of accrual-based and cash-based accounting information in forecasting future cash flows for quoted non-financial companies in the Nigerian stock exchange. Findings: It has been revealed in this study that historical earnings data prepared under the accrual-basis possessed superior predictive ability over operating cash flows data in forecasting future cash flows of quoted non-financial firms in Nigeria. Conclusions: Company management who are saddled with the responsibility of preparation and presentation of financial statements as part of their management responsibility should, as a matter of utmost priority, uphold integrity and transparency by adhering strictly to the provisions of accounting standards so as to enhance reliability and decision-usefulness of financial disclosures with a view to improving the predictive ability of accounting information.
Year of publication: |
2018
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Authors: | Ebiaghan, Orits Frank |
Published in: |
Trends economics and management. - Brno : [Verlag nicht ermittelbar], ISSN 2336-6508, ZDB-ID 2948294-X. - Vol. 12.2018, 32, p. 35-48
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Subject: | Accounting Bases | accounting information | accrual accounting | cash accounting | cash-flows predictions | Cash Flow | Cash flow | Nigeria | Rechnungswesen | Accounting | Prognoseverfahren | Forecasting model | Bilanzpolitik | Accounting policy |
Saved in:
freely available
Type of publication: | Article |
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Type of publication (narrower categories): | Aufsatz in Zeitschrift ; Article in journal |
Language: | English |
Other identifiers: | 10.13164/trends.2018.32.35. [DOI] 10.13164/trends.2018.32.35 [DOI] |
Classification: | M40 - Accounting and Auditing. General ; M41 - Accounting ; M49 - Accounting and Auditing. Other |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10012022234
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