The main objective of this paper is to examine the persistence, pricing and economic significance of the cash component of earnings in Tehran stock exchange listed firms from 2001 to 2016. In so doing, we break down the cash component of earnings into changes in the cash balance and into issuances/distributions to debtholders and equity holders. The naïve investor hypothesis predicts a positive relation between the cash component of earnings and future stock returns. We find that the cash component of earnings is more persistent than the accrual component and that this higher persistence can be attributed primarily to cash distributed to debtholders. The result from our first pricing model dosen't support the naïve investor hypothesis and show that future normal stock returns have not the positive correlation with the most persistent cash subcomponent of earnings. But the results show that future abnormal stock returns have the strongest positive correlation with cash distributed to debtholders and thus the result from our seconed pricing model supports the naïve investor hypothesis.
yusefiaslt,F. , bagheripoormehr,S. and fahimi,M. (2017). Implications of the Cash Component of Earnings for Earnings Persistence and Stock Returns. Operational and Performance Research in Accounting and Auditing, 1(3), 77-98.
MLA
yusefiaslt,F. , , bagheripoormehr,S. , and fahimi,M. . "Implications of the Cash Component of Earnings for Earnings Persistence and Stock Returns", Operational and Performance Research in Accounting and Auditing, 1, 3, 2017, 77-98.
HARVARD
yusefiaslt F., bagheripoormehr S., fahimi M. (2017). 'Implications of the Cash Component of Earnings for Earnings Persistence and Stock Returns', Operational and Performance Research in Accounting and Auditing, 1(3), pp. 77-98.
CHICAGO
F. yusefiaslt, S. bagheripoormehr and M. fahimi, "Implications of the Cash Component of Earnings for Earnings Persistence and Stock Returns," Operational and Performance Research in Accounting and Auditing, 1 3 (2017): 77-98,
VANCOUVER
yusefiaslt F., bagheripoormehr S., fahimi M. Implications of the Cash Component of Earnings for Earnings Persistence and Stock Returns. Oper. Perform. Res. Acc. Audit., 2017; 1(3): 77-98.
