Persistent Link:
http://hdl.handle.net/10150/145457
Title:
On the Asymmetric Timeliness of Operating Cash Flows
Author:
Steele, Logan B.
Issue Date:
2011
Publisher:
The University of Arizona.
Rights:
Copyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.
Abstract:
I examine why operating cash flows exhibit asymmetric timeliness with respect to stock returns and given this understanding, address the consequences for research into conditional accounting conservatism. Numerous studies document that operating cash flows are more sensitive to negative stock returns relative to positive returns. Because the properties of cash flows are defined largely by the operating (rather than reporting) decisions taken by management, the asymmetric relation with returns cannot be explained by conditional conservatism. I find that the asymmetric timeliness of cash flows is primarily driven by product pricing, whereby managers are quick to cut prices in response to bad economic news, but do not appear to increase prices in response to good economic news. Consistent with this reasoning, I find that firms with greater pricing power exhibit lower asymmetric timeliness in operating cash flows as well as in earnings.Variation in the asymmetric timeliness of earnings induced by operating cash flows should not be interpreted as evidence of conditional conservatism. With this in mind, I revisit several existing inferences regarding conditional conservatism. I conclude that researchers should employ a specification of the Basu 1997 model that (1) avoids the confounding effect of cash flow asymmetry and (2) addresses the matching role of accruals.
Type:
Electronic Dissertation; text
Degree Name:
Ph.D.
Degree Level:
doctoral
Degree Program:
Graduate College; Accounting
Degree Grantor:
University of Arizona
Advisor:
Bens, Daniel A.
Committee Chair:
Bens, Daniel A.

Full metadata record

DC FieldValue Language
dc.language.isoenen_US
dc.titleOn the Asymmetric Timeliness of Operating Cash Flowsen_US
dc.creatorSteele, Logan B.en_US
dc.contributor.authorSteele, Logan B.en_US
dc.date.issued2011-
dc.publisherThe University of Arizona.en_US
dc.rightsCopyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author.en_US
dc.description.abstractI examine why operating cash flows exhibit asymmetric timeliness with respect to stock returns and given this understanding, address the consequences for research into conditional accounting conservatism. Numerous studies document that operating cash flows are more sensitive to negative stock returns relative to positive returns. Because the properties of cash flows are defined largely by the operating (rather than reporting) decisions taken by management, the asymmetric relation with returns cannot be explained by conditional conservatism. I find that the asymmetric timeliness of cash flows is primarily driven by product pricing, whereby managers are quick to cut prices in response to bad economic news, but do not appear to increase prices in response to good economic news. Consistent with this reasoning, I find that firms with greater pricing power exhibit lower asymmetric timeliness in operating cash flows as well as in earnings.Variation in the asymmetric timeliness of earnings induced by operating cash flows should not be interpreted as evidence of conditional conservatism. With this in mind, I revisit several existing inferences regarding conditional conservatism. I conclude that researchers should employ a specification of the Basu 1997 model that (1) avoids the confounding effect of cash flow asymmetry and (2) addresses the matching role of accruals.en_US
dc.typeElectronic Dissertationen_US
dc.typetexten_US
thesis.degree.namePh.D.en_US
thesis.degree.leveldoctoralen_US
thesis.degree.disciplineGraduate Collegeen_US
thesis.degree.disciplineAccountingen_US
thesis.degree.grantorUniversity of Arizonaen_US
dc.contributor.advisorBens, Daniel A.en_US
dc.contributor.chairBens, Daniel A.en_US
dc.contributor.committeememberDhaliwal, Dan S.en_US
dc.contributor.committeememberTrombley, Mark A.en_US
dc.identifier.proquest11611-
dc.identifier.oclc752261470-
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