Harnessing Financial Information in Investors Decissions: Accrual Accounting versus Cash Accounting

• Published in: Procedia economics and finance 2015, Vol.26, p.1044-1051
• Main Authors: Toma, Constantin, Carp, Mihai, Robu, Ioan Bogdan
• Format: Article
• Language: English
• Subjects: accrual accounting; cash accounting; financial information; investors; value relevance
• ISSN: 2212-5671; 2212-5671
• DOI: 10.1016/S2212-5671(15)00928-4

This study aims to analyze the influence of the value added of the information developed according on the two main accounting systems for investment decision making, with direct impact on the market capitalization of the listed companies. To obtain the research results, in the study were analyzed specific financial information, collected for a sample of 65 Romanian listed companies on the Bucharest Stock Exchange, between 2011 and 2013. For data analysis were used econometric models from the literature, based on the multiple regression analysis and adapted to the research objectives. At the level of the study, there was estimated and tested the influence of the information attained based on the use of cash accounting (quantified through the cash flow from operations, cash flow from investing and cash flow from financing) and based on the use of accrual accounting (quantified through the variation of the operating and net income) on the capital gains yield of listed companies. Research results show a growth of the value relevance of the information obtained based on the use of accrual accounting compared to the ones obtained as a result of cash accounting use, in the case of Romanian listed companies.