The Development Of Voluntary Cash Flow Statements In Germany And The Influence Of International Reporting Standards

This paper studies the incentives of German firms to voluntarily disclose cash flow statements. Although cash flow statements have not been mandatory in Germany until recently, an increasing number of firms have voluntarily provided cash flow statements. These firms are likely to be influenced by recommendations of the German accounting profession, IAS 7, and the respective standards of other countries. This paper studies this influence by looking at the adoption pattern of the cash flow statement over time, and its format. It uses milestones in the evolution of German professional recommendations and respective international standards to chart the development of voluntary cash flow statements. The paper analyzes the cross-sectional determinants of voluntary (international) cash flow statements using probit regressions and factor analysis. The results support the idea that capital-market forces drive the disclosure of cash flow statements that conform with international reporting practice.