The predictive ability earnings components and political uncertainty: evidence from Latin America
Purpose: We examine whether the ability of current cash flow and accruals components to forecast future cash flows is affected in periods of political uncertainty. Methodology: The national election year were considered proxies for political uncertainty, while the equation to forecast year-ahead cas...
| Authors: | , |
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| Format: | article |
| Status: | Published version |
| Publication Date: | 2021 |
| Country: | Brasil |
| Institution: | Academia Brasileira de Ciências Contábeis (Abracicon) |
| Repository: | Revista de Educação e Pesquisa em Contabilidade |
| Language: | Portuguese English |
| OAI Identifier: | oai:ojs.www.repec.org.br:article/2868 |
| Online Access: | https://www.repec.org.br/repec/article/view/2868 |
| Access Level: | Open access |
| Keyword: | Political Uncertainty Predictive ability of earnings Accruals Cash flows Incerteza Política Capacidade preditiva dos lucros Fluxos de Caixa |
| Summary: | Purpose: We examine whether the ability of current cash flow and accruals components to forecast future cash flows is affected in periods of political uncertainty. Methodology: The national election year were considered proxies for political uncertainty, while the equation to forecast year-ahead cash flow was estimated by Sys-GMM and used to capture the predictive ability of earnings components according to periods of political uncertainty. Results: the predictive ability of the current cash flow component was negatively influenced by periods of political uncertainty, whereas the ability of the accruals component was not affected by those periods. We conclude that political uncertainty negatively affects the predictive ability of the reported earnings components, but this effect was conclusive only for the current cash flow component. Contributions: the main contribution of this study is the presentation of the reality of capital markets in emerging countries. Furthermore, it adds knowledge to the literature related to the political uncertainty hypothesis, shedding light on the impact of this event on the supply and availability of useful information in the capital markets of emerging countries. It is also relevant for agents who make forecasts about firms' future cash flows. |
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