Skip to content Skip to navigation
University of Warwick
  • Study
  • |
  • Research
  • |
  • Business
  • |
  • Alumni
  • |
  • News
  • |
  • About

University of Warwick
Publications service & WRAP

Highlight your research

  • WRAP
    • Home
    • Search WRAP
    • Browse by Warwick Author
    • Browse WRAP by Year
    • Browse WRAP by Subject
    • Browse WRAP by Department
    • Browse WRAP by Funder
    • Browse Theses by Department
  • Publications Service
    • Home
    • Search Publications Service
    • Browse by Warwick Author
    • Browse Publications service by Year
    • Browse Publications service by Subject
    • Browse Publications service by Department
    • Browse Publications service by Funder
  • Help & Advice
University of Warwick

The Library

  • Login
  • Admin

The determinants and valuation effects of classification choice on the statement of cash flows

Tools
- Tools
+ Tools

Charitou, Andreas, Karamanou, Irene and Kopita, Anastasia (2018) The determinants and valuation effects of classification choice on the statement of cash flows. Accounting and Business Research, 48 (6). pp. 613-650. doi:10.1080/00014788.2017.1407626

[img]
Preview
PDF
WRAP-determinants-valuation-effects-classification-choice-statement-cash-flows-Kopita-2018.pdf - Accepted Version - Requires a PDF viewer.

Download (1100Kb) | Preview
Official URL: http://dx.doi.org/10.1080/00014788.2017.1407626

Request Changes to record.

Abstract

In this paper we exploit the choice allowed by International Financial Reporting Standards (IFRS) regarding the presentation of interest payments on the cash flow statement to answer two related questions: First, whether the classification choice is explained by firm reporting incentives and second, whether it is value relevant. Using a UK sample, we find that firms reporting losses, with a greater proportion of their debt stemming from public sources, with CFO-based covenants and greater increases in leverage in the year of adoption are less likely to report interest payments in cash flows from operating activities (CFOA). Results also suggest that the incentive to meet or beat analyst CFO forecasts decreases, but strong corporate governance increases the probability of including interest payments in CFOA. Based on the assumption that the decision not to classify interest payments in CFOA captures lower disclosure quality or poor future expected performance, we posit that these firms should also exhibit lower valuations. Results obtained after correcting for self-selection bias confirm this assertion. We conclude that managers’ decision not to classify interest payments in CFOA is consistent with the opportunistic use of the choice allowed by IFRS.

Item Type: Journal Article
Subjects: H Social Sciences > HF Commerce
Divisions: Faculty of Social Sciences > Warwick Business School > Accounting
Faculty of Social Sciences > Warwick Business School
Library of Congress Subject Headings (LCSH): Financial statements -- Standards -- Case studies -- Great Britain, Cash flow
Journal or Publication Title: Accounting and Business Research
Publisher: Routledge
ISSN: 0001-4788
Official Date: 2018
Dates:
DateEvent
2018Published
12 December 2017Available
30 October 2017Accepted
Volume: 48
Number: 6
Page Range: pp. 613-650
DOI: 10.1080/00014788.2017.1407626
Status: Peer Reviewed
Publication Status: Published
Publisher Statement: This is an Accepted Manuscript of an article published by Taylor & Francis in Accounting and Business Research on 12th Dec 2017, available online: http://www.tandfonline.com/10.1080/00014788.2017.1407626
Access rights to Published version: Restricted or Subscription Access

Request changes or add full text files to a record

Repository staff actions (login required)

View Item View Item

Downloads

Downloads per month over past year

View more statistics

twitter

Email us: wrap@warwick.ac.uk
Contact Details
About Us