Persistence and Predictive Ability of Earnings: Evidence from France and the UK

The persistence and predictive ability are extensively requested as desirable attributes of earnings quality in the literature. The paper aims at investigating the persistence and predictive ability of earnings in French and UK companies. The study included a panel data of 1035 firm-year observation...

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Autor principal:	Kimouche Bilal
Formato:	article
Lenguaje:	EN
Publicado:	Sciendo 2021
Materias:	cash flows from operations current earnings earnings persistence french companies future cash flows future earnings predictive ability of earnings uk companies m40 m41 Business HF5001-6182 Economics as a science HB71-74
Acceso en línea:	https://doaj.org/article/a1554fff680646b4a6de920b72ff65d2
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spelling	oai:doaj.org-article:a1554fff680646b4a6de920b72ff65d22021-12-05T14:11:07ZPersistence and Predictive Ability of Earnings: Evidence from France and the UK2256-039410.2478/eb-2021-0013https://doaj.org/article/a1554fff680646b4a6de920b72ff65d22021-01-01T00:00:00Zhttps://doi.org/10.2478/eb-2021-0013https://doaj.org/toc/2256-0394The persistence and predictive ability are extensively requested as desirable attributes of earnings quality in the literature. The paper aims at investigating the persistence and predictive ability of earnings in French and UK companies. The study included a panel data of 1035 firm-year observations for 115 French listed companies from the CAC All-Tradable and 900 firm-year observations for 100 UK listed companies from the FTSE All-Share, during the period of 2011–2019. The research design was based on two equations starting from Sloan (1996) that were estimated using Fixed Effects Method. The study showed that earnings were persistent but they had no predictive ability regarding the future cash flows whether in French or UK companies and that earnings of UK companies were more persistent than those of the French companies. We argue that the persistence of earnings and the inability to predict future cash flows can be evidence of earnings management. The study contributes to the literature about earnings quality by studying earnings persistence and earnings predictive ability together in two different environments. The results require that users must take into consideration the illusory persistence of earnings, auditors must be cautious regarding the manipulation of earnings by managers, and accounting standard setters must review the reporting guidelines of cash flows to enhance their predictability by earnings.Kimouche BilalSciendoarticlecash flows from operationscurrent earningsearnings persistencefrench companiesfuture cash flowsfuture earningspredictive ability of earningsuk companiesm40m41BusinessHF5001-6182Economics as a scienceHB71-74ENEconomics and Business, Vol 35, Iss 1, Pp 190-200 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	cash flows from operations current earnings earnings persistence french companies future cash flows future earnings predictive ability of earnings uk companies m40 m41 Business HF5001-6182 Economics as a science HB71-74
spellingShingle	cash flows from operations current earnings earnings persistence french companies future cash flows future earnings predictive ability of earnings uk companies m40 m41 Business HF5001-6182 Economics as a science HB71-74 Kimouche Bilal Persistence and Predictive Ability of Earnings: Evidence from France and the UK
description	The persistence and predictive ability are extensively requested as desirable attributes of earnings quality in the literature. The paper aims at investigating the persistence and predictive ability of earnings in French and UK companies. The study included a panel data of 1035 firm-year observations for 115 French listed companies from the CAC All-Tradable and 900 firm-year observations for 100 UK listed companies from the FTSE All-Share, during the period of 2011–2019. The research design was based on two equations starting from Sloan (1996) that were estimated using Fixed Effects Method. The study showed that earnings were persistent but they had no predictive ability regarding the future cash flows whether in French or UK companies and that earnings of UK companies were more persistent than those of the French companies. We argue that the persistence of earnings and the inability to predict future cash flows can be evidence of earnings management. The study contributes to the literature about earnings quality by studying earnings persistence and earnings predictive ability together in two different environments. The results require that users must take into consideration the illusory persistence of earnings, auditors must be cautious regarding the manipulation of earnings by managers, and accounting standard setters must review the reporting guidelines of cash flows to enhance their predictability by earnings.
format	article
author	Kimouche Bilal
author_facet	Kimouche Bilal
author_sort	Kimouche Bilal
title	Persistence and Predictive Ability of Earnings: Evidence from France and the UK
title_short	Persistence and Predictive Ability of Earnings: Evidence from France and the UK
title_full	Persistence and Predictive Ability of Earnings: Evidence from France and the UK
title_fullStr	Persistence and Predictive Ability of Earnings: Evidence from France and the UK
title_full_unstemmed	Persistence and Predictive Ability of Earnings: Evidence from France and the UK
title_sort	persistence and predictive ability of earnings: evidence from france and the uk
publisher	Sciendo
publishDate	2021
url	https://doaj.org/article/a1554fff680646b4a6de920b72ff65d2
work_keys_str_mv	AT kimouchebilal persistenceandpredictiveabilityofearningsevidencefromfranceandtheuk
_version_	1718371376359800832

Persistence and Predictive Ability of Earnings: Evidence from France and the UK

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