Assessment of the Comparative Ability of Accounting Bases in Predicting Future Cash Flows: Evidence from Nigeria

Authors

  • Ebiaghan Orits Frank DELTA STATE UNIVERSITY ABRAKA, NIGERIA

DOI:

https://doi.org/10.13164/trends.2018.32.35.

Keywords:

Accounting Bases, accounting information, accrual accounting, cash accounting, cash-flows predictions

Abstract

Purpose of the article: This study examines the comparative abilities of accrual-based and cash-based accounting information to predict future operating cash flows with particular focus on quoted Nigerian non-financial companies. Secondary data were utilized for the study and were extracted from published annual statements and accounts of eighty (80) quoted firms in Nigeria between 2005–2015. Methodology/methods: Data collected were statistically analysed with the aid of the Ordinary Least Square (OLS) regression method, correlation analysis, variance inflation factor (VIF) tests for multicollinearity, and the Breusch-Pagan/Cook Weisberg test for heteroscedasticity. 5% level of the test of significance was employed to measure the degree of statistical relationship between stated variables. Scientific aim: This research is aimed at empirically ascertaining, by means of available statistics, the comparative predictive abilities of accrual-based and cash-based accounting information in forecasting future cash flows for quoted non-financial companies in the Nigerian stock exchange. Findings: It has been revealed in this study that historical earnings data prepared under the accrual-basis possessed superior predictive ability over operating cash flows data in forecasting future cash flows of quoted non-financial firms in Nigeria. Conclusions: Company management who are saddled with the responsibility of preparation and presentation of financial statements as part of their management responsibility should, as a matter of utmost priority, uphold integrity and transparency by adhering strictly to the provisions of accounting standards so as to enhance reliability and decision-usefulness of financial disclosures with a view to improving the predictive ability of accounting information.

Author Biography

  • Ebiaghan Orits Frank, DELTA STATE UNIVERSITY ABRAKA, NIGERIA
    I am Dr.Ebiaghan orits frank Lecturer 1 in the Department of accounting /finanace Delta state university abraka Nigeria

Downloads

Published

2018-12-31

Issue

Section

ORIGINAL SCIENTIFIC ARTICLE