1
Ph.D.c of Accounting, Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran
2
Ferdowsi University of Mashhad
10.22108/far.2025.144226.2101
Abstract
The information needs of investors for making informed decisions, as well as companies' need to effectively manage their resources, have consistently drawn researchers' attention to the prediction of future operating cash flows. However, prior empirical evidence on cash flow prediction models has been mixed. This study examines the importance and impact of considering transitory items in accrual accounting, as well as cross-sectional heterogeneity among firms, on the conflicting prior evidence regarding the comparison between accrual-based earnings and operating cash flows in predicting future operating cash flows and related contexts. To test the hypotheses, a sample of 62 companies listed on the Tehran Stock Exchange from 2013 to 2022 was used. Four different earnings components, along with operating cash flows, were analyzed under several forecasting approaches, including cross-sectional, pooled, industry-level, and firm-level estimations, in both univariate and bivariate comparisons. The results indicate that accounting earnings that excluding transitory items have better predictive power for future operating cash flows than operating cash flows themselves. Furthermore, accounting for cross-sectional differences in the relationship between firms' earnings and future cash flows enhances the predictive ability of accruals and increases the reliability of accounting earnings in forecasting future operating cash flows.
darvishi, M. , mahmoudi yekebaghi, R. and Saei, M. J. (2024). A Comparative Study of Cash Flow Forecasting with Cash and Accrual Items: Evidence from Heterogeneity and Transitory Items. Financial Accounting Research, 16(3), 31-60. doi: 10.22108/far.2025.144226.2101
MLA
darvishi, M. , , mahmoudi yekebaghi, R. , and Saei, M. J. . "A Comparative Study of Cash Flow Forecasting with Cash and Accrual Items: Evidence from Heterogeneity and Transitory Items", Financial Accounting Research, 16, 3, 2024, 31-60. doi: 10.22108/far.2025.144226.2101
HARVARD
darvishi, M., mahmoudi yekebaghi, R., Saei, M. J. (2024). 'A Comparative Study of Cash Flow Forecasting with Cash and Accrual Items: Evidence from Heterogeneity and Transitory Items', Financial Accounting Research, 16(3), pp. 31-60. doi: 10.22108/far.2025.144226.2101
CHICAGO
M. darvishi , R. mahmoudi yekebaghi and M. J. Saei, "A Comparative Study of Cash Flow Forecasting with Cash and Accrual Items: Evidence from Heterogeneity and Transitory Items," Financial Accounting Research, 16 3 (2024): 31-60, doi: 10.22108/far.2025.144226.2101
VANCOUVER
darvishi, M., mahmoudi yekebaghi, R., Saei, M. J. A Comparative Study of Cash Flow Forecasting with Cash and Accrual Items: Evidence from Heterogeneity and Transitory Items. Financial Accounting Research, 2024; 16(3): 31-60. doi: 10.22108/far.2025.144226.2101
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