The Value Relevance of Earnings and Cash Flow: Regression-Variation Approach

Dwi Fitri Puspa


This study is conducted to measure the value relevance of earnings and cash flows by using the regression-variation approach. Specifically, the objectives of the study are to examine whether the value relevance of accounting earnings information is higher compared to that observed in the cash flow from operations.  The number of sample is 79 companies listed in Jakarta Stock Exchange and during the sample period of 1996 to 2001. The findings indicate that earnings and cash flows from operation are value-relevant. Furthermore the findings show that the value relevance of earnings information is higher than that of cash flows information.


Value Relevance; Cash Flows; Earnings

Full Text:

Download Article


Aharony, J., Lee, C.J., & Wang, T.J. (2000). Financial Packaging of IPO Firms in China. Journal of Accounting Research, 38(1), 103-126.

Alford, A., Jones, J., Leftwish, R. & Zmijewski, M. (1993). The relative informativeness of accounting disclosures in different countries. Journal of Accounting Research, 31(3), 183-223.

Amir, E., Harris,T.S., & Venuti, E.K. (1993). A comparison of the value-relevance of U.S versus non-US. GAAP accounting measures using form 20-F reconciliations. Journal of Accounting Research, 31(3), 230-264.

Amir, E., & Lev, B. (1996). Value-relevance of non financial information: the wireless communications industry. Journal of Accounting and Economics, 22(1), 3-30.

Ball, R., & Brown, P. (1968). An empirical evaluation of accounting income numbers. Journal of Accounting Research, 6(2), 159-178.

Bernard, V.L. (1987). Cross-sectional Dependence and Problems in Inference in market-based accounting research. Journal of Accounting Research, 25(1), 1-48.

Chen, J.P.C., X.Su., & Chen, S.(2001). Is accounting information value-relevant in the emerging Chinese stock market? Journal of International Accounting, Auditing & Taxation, 10(1), 1-22.

Collins, D., Maydew, E., & Weiss, I.S. (1997). Changes in the value relevance of earnings and book values over the past forty years. Journal of Accounting and Economics, 24(1), 39-67.

Curran, J.(1994). China’s investment boom. Fortune, pp. 117-142.

Dechow, P. (1994). Accounting earnings and cash flows as measures of firm performance: the role of accounting accruals. Journal of Accounting and Economics, 18 (1), 3-42.

Easton, P.D. (1999). Security returns and the value relevance of accounting data. Accounting Horizon, 13, 399-412.

Easton, P, & Harris, T.S. (1991). Earnings as an explanatory variable for returns. Journal of Accounting Research, 29(1), 19-36.

Ely, K.,& Waymire, G. (1999). Accounting standard setting organizations and earnings relevance: longitudinal evidence from NYSE common stocks, 1927-93. Journal of Accounting Research, 37 (2), 293-317.

Francis, J., & Schipper, K. (1999). Have financial statements lost their relevance?. Journal of Accounting Research, 37(2), 319-351.

Graham, R.C., & King, R.D. ( 2000). Accounting practices and the market valuation of accounting numbers: evidence from Indonesia, Korea, Malaysia, the Philippines, Taiwan, and Thailand. The International Journal of Accounting, 35(4), 445-470.

Harris,T.S., Lang, M., & Muller, H.P. (1994). The value relevance of German accounting measures: an empirical analysis. Journal of Accounting Research, 32(2), 187-209.

Haw, I.M., Qi, D., & Wu, W. (1998). Value-relevance of financial reporting disclosures in an emerging capital market: the case of B-shares and H-shares in China. Working Paper. The Chinese University of Hong Kong.

Marton, J. (1998). Accounting and stock markets- a study of Swedish accounting for international investors and analysts, Ph.D thesis, School of Economics and Commercial Law, Gothenburg.

McNichols, M., & Wilson, G.P. (1988). Evidence of earnings management from the provisions for bank debts. Journal of Accounting Research, 26(3), 1-31.

Nilsson, H. (2003). Essay on the value relevance of financial statement information, Umea School of Business and Economics. Umea University.

Rosser, A. (1999). The Political economy of accounting reform in developing countries: The Case of Indonesia. Working Paper. Murdoch University.


  • There are currently no refbacks.

Certified Public Accountant (CPA) Test Centre Room
Gedung Ki Bagus Hadikusuma (E4) Lantai 2 Pojok Barat, Universitas Muhammadiyah Yogyakarta,
Jalan Brawijaya (Lingkar Selatan), Tamantirto, Kasihan, Bantul, Daerah Istimewa Yogyakarta, Indonesia
Website: - E-mail:
Phone: +62 274 387 656 (ext: 334)

Journal of Accounting and Investment is licensed under Creative Commons Attribution 4.0 International License.