Earnings decomposition and the persistence of earnings

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dc.contributor.author Kean, Stephen en_US
dc.contributor.author Wells, Peter en_US
dc.date.accessioned 2009-12-21T02:38:05Z
dc.date.available 2009-12-21T02:38:05Z
dc.date.issued 2007 en_US
dc.identifier 2007001598 en_US
dc.identifier.citation Kean Stephen and Wells Peter 2007, 'Earnings decomposition and the persistence of earnings', Royal Melbourne Institute of Technology, vol. 20, no. 2, pp. 112-128. en_US
dc.identifier.issn 1030-9616 en_US
dc.identifier.other C1 en_US
dc.identifier.uri http://hdl.handle.net/10453/5409
dc.description.abstract Forecasting future period profitability is widely identified as an aim of financial statement analysis, and these forecasts are typically relied upon for the estimation of firm value. To facilitate this, the decomposition of earnings into its components or drivers, is typically advocated. This paper investigates the existence of systematic differences in persistence across the components of earnings. If components of earnings experience differences in persistence, this may provide insights into the determinants of aggregate earnings level and persistence. This paper provides evidence of differences in persistence between components of earnings. Differences are found between components formed on the basis of: financial ratios; operating and financing activities; and cash and accruals. Furthermore, there is evidence that earnings components improve the explanatory power of models evaluating aggregate earnings persistence, with this result being strongest for firms with extreme income decreasing accruals. Due to the pivotal role of earnings in firm valuation, the results from this paper have direct implications for valuation. en_US
dc.publisher Royal Melbourne Institute of Technology en_US
dc.relation.isbasedon http://dx.doi.org/10.1108/10309610780000696 en_US
dc.title Earnings decomposition and the persistence of earnings en_US
dc.parent Accounting Research Journal en_US
dc.journal.volume 20 en_US
dc.journal.number 2 en_US
dc.publocation Melbourne, Australia en_US
dc.identifier.startpage 112 en_US
dc.identifier.endpage 128 en_US
dc.cauo.name BUS.School of Accounting en_US
dc.conference Verified OK en_US
dc.for 150103 en_US
dc.personcode 990694 en_US
dc.personcode 920016 en_US
dc.percentage 100 en_US
dc.classification.name Financial Accounting en_US
dc.classification.type FOR-08 en_US
dc.description.keywords Earnings persistence, Financial reporting en_US
dc.staffid 920016 en_US

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