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In contrast to earlier studies, the most recent studies on the incremental value relevance of earnings and cash flows from operations find that both earnings and cash flows have incremental value relevance beyond each other. An interesting question that follows is whether these findings hold after controlling the extremity of earnings and cash flows. This study, therefore, aims to examine the incremental value relevance of earnings and cash flows in the following four cases: moderate earnings and moderate cash flows, moderate earnings and extreme cash flows, extreme earnings and moderate cash flows and extreme earnings and extreme cash flows.

To evaluate the incremental value relevance (information content) of earnings and cash flows for each of the four cases mentioned above, we examine the statistical significance of the slope coefficients for regression of returns on both unexpected earnings and unexpected cash flows from operations.

The results show that (i) both moderate and extreme earnings have incremental value relevance beyond both moderate and extreme cash flows, (ii) moderate cash flows have incremental value relevance beyond both moderate and extreme earnings and (iii) extreme cash flows lack incremental value relevance beyond moderate earnings; however, they (extreme cash flows) have incremental value relevance beyond extreme earnings. These results suggest that earnings and cash flows have incremental value relevance. However, only in cases when cash flows are extreme and earnings are moderate, cash flows do not possess incremental value relevance. In further analysis, we find that the value relevance for cash flows and earnings decreases when they are extreme and transitory. Moreover, the value relevance for cash flows increases when they are moderate (not extreme) and the other competing measure (earnings) is transitory and extreme.

The results support the idea that earnings and cash flows from operations complement each other in explaining variation in returns. However, when cash flows are extreme and less informative, investors rely more on earnings in firm valuation, especially when earnings are moderate. Because earnings are unlikely to persist to be permanent across the years, these results can be interpreted as indicating that cash flows and earnings information are used jointly by investors.

In contrast to previous studies, we control for the extremity of earnings and cash flows when evaluating the incremental value relevance of earnings and cash flows from operations.

This study investigates the incremental value‐relevance of non‐pension postretirement benefit obligations and expenses (disclosed by firms pursuant to SFAS 106). Our study is motivated by previously published evidences that investors value the SFAS 106 measure of postretirement benefit obligations. However, prior research does not address incremental value‐relevance of the SFAS 106. We address two related questions. First, “do the SFAS 106 measures of non‐pension postretirement benefit obligations and expenses provide incremental value relevance (after controlling for information available from non‐SFAS 106 sources).” Second, “under what circumstances are the SFAS‐106 measures more likely to provide incremental value relevance.” The key findings of this paper are: (i) on average, SFAS 106 measures of postretirement benefit obligations and expenses have no significant incremental value‐relevance after controlling for non‐SFAS 106 information; and (ii) labor intensity and the magnitude of postretirement benefit obligation increases the incremental value‐relevance of SFAS 106 measures.

The purpose of this study is to investigate the role of book values, earnings, and future earnings in equity valuation by time, life cycle stage, and market uncertainty using samples of USA and Japanese companies.

This study employs Lubberink and Willett (2021) methodology in using log-linear models to estimate the value relevance of accounting numbers and follows Schaberl (2016) approach to measure %incremental value relevance. The study also includes future earnings in a basic valuation model (Ohlson, 1995) to explore the extent to which stock prices are forward looking.

This study finds a significant increase by time in the relative value relevance of a combined model with book values and earnings and a combined model with future earnings for both countries. However, the incremental value relevance of book values, earnings, and future earnings remain stable over time. The results by life cycle stage indicate that incremental value relevance of future earnings and earnings are more (less) pronounced for firms in the intro (mature) life cycle stage while the incremental value relevance of book values is highest for firms in the decline stage for both countries. The results by market uncertainty indicate that firms with high market uncertainty display higher incremental value relevance of book values for both countries. The results on future earnings are mixed as USA (Japan) firms with high (low) market uncertainty display more (less) incremental value relevance of future earnings.

The findings in this study enhance the merits of two basic financial statements (balance sheet and income statement) in a firm's equity valuation for potential investors and existing shareholders and document an additional role of future earnings information in reflecting a firm's stock price, which is beyond what book values and current earnings have already contributed.

This is the first study that uses log-linear models to estimate the value relevance of accounting numbers and investigates value relevance of accounting information in three views: time, life cycle stage, and market uncertainty.

The purpose of this paper is to examine and compare the relative and incremental value‐relevance of a comprehensive set of accounting‐based measures of firm's performance in the emerging capital market of Egypt.

The regression models are estimated using OLS to investigate the relative and incremental value relevance of accounting‐based performance measures. The relative value relevance tests are used to examine which performance measures better explain stock returns. The study also uses the incremental value relevance tests to examine whether one of these measures provides value‐relevance data beyond that provided by another.

The results of the empirical tests indicate that relative and incremental value relevance tend to increase when moving down in the income statement, with net income having the largest relative and incremental value relevance while total sales have the lowest relative and incremental value relevance. Also, all of the accrual‐based performance measures have relative and incremental value relevance statistically higher than that of operating cash flows.

The results highlight the importance of accounting‐based performance measures in Egypt. The results shed light on the fixation on net income that is bottom line performance measure in the income statement where net income has the highest value relevance to Egyptian capital market. However, owing to relatively small sample size, given the thinness of the Egyptian capital market, these findings should be interpreted with caution.

This study presents extended research on the usefulness of accounting‐based metrics as proxies for firms' performance in Egypt as one of emerging markets.

This study aims to examine whether or not listed companies' disclosure of intellectual capital is value‐relevant in share markets and to assess its moderating role in the value‐relevance of reported earnings and equity following the adoption of international financial reporting standards (IFRS).

A measure of intellectual capital disclosure (ICD), based on a content analysis of the text in annual reports sampled from listed companies in Britain, Australia, Hong Kong and Singapore, is incorporated in the models to examine the direct and moderating roles of ICD in a firm's valuation.

The results reveal that ICD is positively associated with market price (i.e. has value relevance) in companies in two of the four countries and in non‐traditional industries. Further, the incremental value relevance of earnings and net assets is mostly non‐significant; however, interaction of these variables with ICD considerably increases the basic coefficients and the explanatory power of the models.

Prior research on the value relevance of reported accounting numbers has not considered the incremental effect of textual ICD in annual reports. This study extends value relevance models by combining textual ICD with accounting numbers in an attempt to assess investors' valuation of firms.

From the findings, a case is made for corporate management (particularly in certain countries and industries) to integrate its accounting policy choices regarding good will and intangibles with its strategies for disclosure of broad intellectual capital information.

First‐time evidence is provided that text‐based ICD is value‐relevant in capital markets and on its moderating effect for the value‐relevance of reported accounting numbers.

The purpose of this paper is to investigate the incremental value relevance of cash flow from operations (CFO) given book value and earnings. It also examines the relative value relevance of earnings and CFO and changes therein between the 2008‐2009 global financial crisis (GFC) and the pre‐crisis period (PCP).

Least square regressions are estimated using modified Ohlson model to examine the research questions. Relative and incremental value relevance is examined by adjusted R² and Vuong Z statistics.

The findings suggest that CFO has value relevance incremental to book value and earnings. The findings also suggest that earnings has greater relative and incremental information content than CFO in the Australian market. The value relevance of earnings has increased and that of CFO has decreased during the GFC compared to the PCP.

This study focuses on a single country. Future studies can conduct cross‐country examination of the impact of the GFC on the value relevance of earnings and CFO.

This study contributes to the debate on the value relevance of CFO incremental to book value and earnings. It also extends the literature, showing that earnings has information content (value relevance) superior to CFO in the Australian market even during an economy‐wide exogenous shock like the one of the 2008‐2009 GFC.

This is the first known study examining the value relevance of fundamental accounting information such as earnings and CFO in the context of the 2008‐2009 GFC. It extends prior research in East Asian countries in the context of 1997 Asian financial crisis and provides evidence on the impact of a world‐wide exogenous shock on the value relevance of earnings and CFO from a relatively mature and developed country with different legal, institutional and enforcement backgrounds.

The Accounting Standards Board of Japan (ASBJ) proposed a new set of endorsed International Financial Reporting Standards in June 2015. ASBJ claims that non-recycling of other comprehensive income (OCI) items decreases the information usefulness of earnings in a proposed comprehensive income standard. There has been no existing empirical evidence which supports the ASBJ’s statement and the purpose of the study is to test whether OCI recycling improves information usefulness of net income from six perspectives: relative and incremental value relevance, persistence, variability, operating cash flow and net income predictive power.

This paper is an empirical work using a listed Japanese firms sample of 5,385 firm-years from fiscal year 2012-2014.

The results challenge the ASBJ’s claim that recycling improves the general information usefulness characteristics of net income. The empirical results show that OCI recycling improves net income’s relative value relevance characteristic of financial firms. However, recycling information by itself does not improve the incremental value relevance, and the predictive power of operating cash flow and net income. The authors also find that the inclusion of recycling decreases the persistence and increases the variability of net income.

This paper has two research limitations. First, this study is constrained to analyze a limited OCI recycling data that is recently disclosed by listed Japanese firms. Second, the results of this study have limited external validity to capital markets with OCI reclassification standards that deviate from Japanese GAAP.

This study provides initial empirical evidence that examines information usefulness of OCI recycling in Japan. The findings of this study are relevant for accounting standards setters aiming to increase the information usefulness of earnings for capital market investors.

The paper aims to examine the value relevance of alternative accounting performance measures in Australia. It also documents the relative and incremental value relevance of revenue vis‐à‐vis earnings and the longitudinal changes in such value relevance. Finally, the impact of certain firm characteristics including firm life cycle on the value relevance of revenue and earnings information is investigated.

The paper utilises data on Australian listed companies from 1992 to 2005 on the level of and changes in seven alternative accounting performance measures. Standard ordinary least square regression is conducted.

Results reveal that: the coefficient estimates on all the performance measures are much higher for large firms compared to their small firm counterpart; the explanatory power of incremental revenue in explaining stock returns has declined significantly over the sample period; and life cycle analysis shows that the combined coefficients for both revenue and earnings are significant in the growth and maturity stages of the firm life cycle.

When making equity valuation decisions investors consider firms' fundamentals as reflected in financial statements. However, which line item is more important for equity valuation is an important consideration. From a regulatory perspective, this stream of research is quite relevant because standard setters will have evidence from an investor viewpoint about whether certain line items, subtotals, and totals should be defined in standards and required to be displayed in financial statements.

The paper adds to the existing capital market research in Australia by documenting differential persistence of alternative performance measures.

This paper aims to examine the impact of the intangible intensity of the firm on the relevance of research and development (R&D) information to determine equity values in India. Additionally, the study compares the association of input information on R&D investment (the reported R&D cost) and output information on R&D investment (patent count) with equity values. Further, the study also examines the operational nature of the firm and patent count, which is the better proxy to measure the intangible intensity of the firm.

The authors compared the explanatory power of R&D information between intangible and non-intangible intensive firms. To estimate the value relevance of R&D information, the authors followed the statistical model based on the theoretical framework of the residual income model.

The results indicate that there is a significant moderating impact of the intangible intensity of the firm on the relevance of R&D information to determine equity values in India over the 25 years study period (from 1991 to 2016). Further, in India, the study finds that the input information of R&D outlay is more relevant than output information on R&D outlay to determine equity values, irrespective of the proxy measure of intangible intensity. Moreover, the study finds that the operational nature of the firm is a better proxy of the intangible intensity of the firm compared to patent counts.

In this study, pooled cross-sectional data were used for analysis. In the future, longitudinal and panel data can be used for more insightful results.

The findings of the study provide direction to investors and creditors to find the intrinsic value of the investments in internally developed intangible assets, which will reduce the asymmetry between the market value and accounting value of equity.

The paper offers insights into the impact of intangible intensity on the relevance quality of R&D information in an emerging country.

The purpose of this paper is to examine, in the context of movement towards a fair‐value based pension accounting standard, the value relevance of both recognized and disclosed pension accounting information.

Using hand‐collected data from Fortune 200 firms, this study includes both recognized and disclosed pension accounting measures (aggregated and disaggregated) in multivariate regression models. The investigation employs tests of relative and incremental value relevance in both equity and credit rating evaluation contexts.

Findings indicate that pension information recognized under a fair‐value‐based accounting model is no more or less value relevant than pension information recognized under the SFAS 87 model. Also, the disclosed off‐balance sheet pension amount is incrementally value relevant for determining share prices. However, it is not value relevant for the credit rating decision.

This study tests the relevance and reliability of accounting information jointly. Theoretically, however, relevance and reliability affect information usefulness and, thus, valuation decisions independently.

This paper yields a number of significant implications for standard setters. The unique evidence that investors apply off‐balance sheet pension amounts in the equity valuation context implies that required recognition under a fair‐value standard may not provide a significant incremental benefit over DB plan disclosures. However, such a standard may yield potential improvements in the credit rating decision context and may be much more likely to impact credit rating decisions going forward. Considering the continued shift towards fair‐value‐based pension accounting standards internationally, recognizing transitory elements of fair‐value pension cost separately from operating income is essential for mitigating any potential loss in value relevance.