Rights statement: This is the author’s version of a work that was accepted for publication in Journal of Accounting Literature. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Accounting Literature, 43, 2019 DOI: 10.1016/j.acclit.2019.03.001
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Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
}
TY - JOUR
T1 - The Informativeness of U.S. Banks’ Statements of Cash Flows
AU - Gao, Zhan
AU - Li, Weijia
AU - O'Hanlon, John Francis
N1 - This is the author’s version of a work that was accepted for publication in Journal of Accounting Literature. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Accounting Literature, 43, 2019 DOI: 10.1016/j.acclit.2019.03.001
PY - 2019/12/1
Y1 - 2019/12/1
N2 - Banks, financial statement users, and accounting standard setters have long disagreed on the informativeness of banks’ statements of cash flows (SCFs) and there is a lack of relevant evidence in the literature. This paper examines the informativeness of the SCFs of U.S. commercial banks in two settings where SCFs are purported to be useful. The first analysis tests the incremental value relevance of banks’ SCFs beyond income statements and balance sheets and compares bank’s SCFs with those of industrial firms. We find that banks’ SCFs have limited incremental value relevance, and are much less value relevant than industrial firms’ SCFs. The second analysis examines and finds no distress-predictive power of banks’ SCFs, especially in the presence of standard distress predictors. Overall, our results are consistent with the view that banks’ SCFs have limited informativeness.
AB - Banks, financial statement users, and accounting standard setters have long disagreed on the informativeness of banks’ statements of cash flows (SCFs) and there is a lack of relevant evidence in the literature. This paper examines the informativeness of the SCFs of U.S. commercial banks in two settings where SCFs are purported to be useful. The first analysis tests the incremental value relevance of banks’ SCFs beyond income statements and balance sheets and compares bank’s SCFs with those of industrial firms. We find that banks’ SCFs have limited incremental value relevance, and are much less value relevant than industrial firms’ SCFs. The second analysis examines and finds no distress-predictive power of banks’ SCFs, especially in the presence of standard distress predictors. Overall, our results are consistent with the view that banks’ SCFs have limited informativeness.
KW - statement of cash flows
KW - banks
KW - value relevance
KW - distress prediction
U2 - 10.1016/j.acclit.2019.03.001
DO - 10.1016/j.acclit.2019.03.001
M3 - Journal article
VL - 43
SP - 1
EP - 18
JO - Journal of Accounting Literature
JF - Journal of Accounting Literature
SN - 0737-4607
ER -