收入和现金流量的定价和权责发生制的确认外文翻译.docx

收入和现金流量的定价和权责发生制的确认外文翻译.docx

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收入和现金流量的定价和权责发生制的确认外文翻译

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外文翻译

原文：

Thepricingofearningsandcashflowsandanaffirmationofaccrualaccounting

Thispaperexaminesacoreideainaccounting,drummedintoeverybeginningaccountingstudent:

accrualaccounting,ratherthancashaccounting,isappropriateforbusinessreporting.Accountinggoesbeyondamerecashbook,toreport（accrual）earningsratherthancashflowasthemeasureofvaluedadded.Thepaperinvestigateswhethercommonsharesarepricedinthestockmarketaccordingtoaccountingprescriptionsonhowearningsandcashflowsaffectshareholders’equity.

Todevelopanempiricalspecificationthatincorporatestheprescriptions,thepaperfirstformallylaysouthowearningsandcashflowsrelatetoshareholders’equityintheaccountingsystem.Withafocusontheshareholder,itmakesthestandarddistinctioninbothvaluationtheoryandaccountingbetweenthebusinessandtheequityclaimonthebusiness.Underaccrualaccounting,earningsfromthebusinessaddtoboththebookvalueofassetsandthebookvalueoftheequityclaimonthoseassets.This,ofcourse,iswellappreciated.Lessappreciated,however,areprescriptionsaboutcashflowthatareimbeddedinaccrualaccounting:

netcashflowfromabusiness—commonlyreferredtoasfreecashflow—hasnoeffectofthebookvalueoftheequity（weshow）butreducesthebookvalueofbusinessassets,dollar-for-dollar.Accrualaccountingtreatscashflownotasanadditiontobusinessvaluebutasapayoutfromthebusiness.Thatpayoutreducesthevalueofbusinesswithoutaffectingthecum-dividendvalueoftheequity.

Theempiricalanalysisshowsthatthestockmarketpricesbusinessfirmsandequityclaimsonfirmsaccordingtothisprescription.Wefindthat,onaverage,annualchangesinboththemarketvalueofthefirmandthemarketvalueofequitysharesarepositivelyrelatedtoannualearnings.However,givenearnings,changesinthemarketvalueofthefirmarenegativelyrelatedtocashflowsfromthefirm.Indeed,adollaroffreecashflowis,onaverage,associatedwithapproximatelyadollarlessinmarketvalueofthefirm,whilechangesinthemarketvalueofequityareunrelatedtothefreecashflowthatbusinessgenerates.Furthermore,separatingouttheinvestmentportionofflowfreecashflow,wefindthattheremaining‘‘cashflowfromoperations’’isalsoassociatedwithlowermarketvalueforthefirm,dollar-for-dollar,andisunrelatedtochangesinequityvalue.

Theresultwithrespecttoearningsis,ofcourse,notnew;thefindingofapositivecorrelationbetweenearningschangesandstockreturnsintheBallandBrown（1968）paperisanaffirmationofaccrualaccounting,replicatedmanytimes.Dechow（1994）andDechowetal.（1998）,amongothers,affirmtheimportanceofaccrualsovercashflowsunderavarietyofconditions.Ouranalysisexploresanadditionalfeatureofaccounting:

notonlydoesaccrualaccountingpromoteearningsastheprimaryvaluationattribute（ratherthancashflows）,butactuallytreatscashflowsasirrelevanttoequityvaluation.Ourempiricalanalysisaffirms.

Theresultwithrespecttocashflowsmaybesurprising,foronetypicallythinksofcashflowasa‘‘good’’—morecashflowmeanshighervalue—andanalystsoftenrecommendstocksofcompaniesthathavepositivecashflow.However,ourresultsarenotsurprisingwhenonerecognizesthateconomictheoryalsoaffirmstheaccounting:

accrualaccountingoperatesinawaythatrecognizesMillerandModigliani（1961）notionofdividenddisplacementandthecomplementarynotionofdividendirrelevance.Justasdividends,thedistributionofcashtoshareholders,reducetheequityclaimbutdonotaffectthecum-dividendvalueofequity,freecashflow,thecorrespondingdistributionfromthefirm（toallclaimants）,isadividendfromthefirmthatreducesthevalueofthefirmbutdoesnotaffectthecum-dividendvalueofthefirm.Becausetheequityclaimisonboththevalueofthefirmandthecashflow,itisunaffectedbythecashflowbutratherbythecum-dividendvalueofthefirm.Inshort,accrualaccountinghonorsthefoundationalprinciplesofmodernfinance,andthestockmarketpricesfirmsandequityclaimsaccordingtotheseprinciples.

Theresultsinthepaperseeminglyconflictwithpreviousresearch.InRayburn（1986）,Wilson（1987）,Dechow（1994）,Bowenetal.（1987）,Clubb（1995）,andFrancisetal.（2003）,amongothers,cashflowvariablesinreturnregressionsloadwithapositivecoefficient,withandwithoutearningsincluded.Thedifferencerevolvesaroundtheissueofspecification.Thispaperdevelopsaregressionspecificationquitemethodically（inSect.1）sothedifferencesarewellunderstood.Indeed,whilethepricingofearningsandcashflowsisoursubstantiveconcern,theissueofspecificationincapitalmarketresearchisasubtext.Inthisrespect,thepaperrespondstotheHolthausenandWatts’（2001）criticismthatcapitalmarketsresearchinaccountinghashadlittletocontributetonormativeissuesfacedbystandardsetters.Withattentiontospecification—whichHolthausenandWattsargueisnecessary—weareabletodrawconclusionsaboutaverybasicnormativeissue,theuseofcashaccountingversusaccrualaccountingforbusinessreporting.Ourresultinnowaynullifiestheresultsinotherpapers;indeed,weareabletoreconcilewhatlooklikeverydifferentfindingstotheearlierresults.

Theabilityofearningstoexplainchangesinmarketvaluesdepends,ofcourse,onhowtheearningsaremeasured.Indeed,oneexpectscashflowtobeinformativeifearningsarepoorlymeasured,andthecomparisonofcashflowtoearningsisastandarddiagnosticinearningsqualityanalysis（see,forexample,Sloan1996;DechowandDichev2002;Dechowetal.2008）.Webuildspecificationsthatexplicitlyrecognizethatcashflows（anddividends）canhaveinformationcontentinresponsetopoorearningsmeasurement.Nevertheless,usingUSGAAPearningsmeasures,wefindthatcashflows,onaverage,donotexplainchangesinstockprices.Theemphasisthatthefindingsapplyonaverageisimportant,forGAAPis（presumably）designedforbroadapplicationinthecross-section.Theaverageresultinnowayabrogatesthefindingsthataccrualaccountingmaybedeficientandcashflowsrelevantinparticularcontexts.

1Specificationofreturnregressionsinvolvingearningsandcashflows

Whiledocumentingtherelevantcorrelations,mostpriorresearchthatrelatesstockpricesandreturnstoearnings,cashflows,orbothdoesnotusepre-specifiedmodels.SomeexceptionsareJennings（1990）,whoaddressessomespecificationissuesinearningsandcashflowsregressions,andBarthetal.（1999）,whorefertovaluationmodelstodevelopregressionequationsinvolvingearningsandcashflows.Inthispaperwedevelopaspecificationandthenputittothetest.Thespecificationisdictatedbytheaccountingstructurethatproducesearningsandcashflowsnumbers.Wefirstlayoutthisstructure（inSect.1.1）,thenspecifypricingequationsthatincorporatethestructure（inSect.1.2）,whichwethentaketothedata（inSect.2）.Ageneraldiscussionofspecificationofreturnsregressionscontainingaccountingnumbersisinthe‘‘Appendix’’.

1.1Accountingrelationsthatgovernaccrualaccounting

Accrualaccounting,atleastnominally,trackstheevolutionofshareholders’equityoverdiscreteperiods;ineachperiod,accountingcalculatesanumber,earnings,whichupdateshareholders’equityviatheclosingentry.Welayoutasetofaccountingoperationsthatamounttoprescriptionsthatgoverntheaccounting.Westartwithcashflows.

1.1.1Cashflowrelations

Thefirm（thebusinessoperations）isdistinguishedfromtheclaimsonthefirm,asinthetypicalbalancesheet.Correspondingly,cashflowsgeneratedbyabusiness（freecashflow）aredistinguishedfromthosepaidtoclaimants.Thestandardcashconservationequationequatesthetwo:

FreeCashFlow=d+F………

（1）

Astheanalysisfocusesonthepricingofcommonshares,thedividendtocommonshareholders,d,isdistinguishedfrompaymentstoallotherclaimants（suchasbondholdersandpreferredstockholders）,F.Distributionstodebtissuers—bythepurchaseoffinancialassetswiththecash—arealsoanapplicationoffreecashflow,soFreferstocashpaymentstonetdebtholders（debtholdersanddebtissuers）.Dividends,d,arenetcashdistributionstoshareholders（dividendsplusstockrepurchaseslessstockissues）.

Itiscommontodistinguishthetwocomponentsoffreecashflow,cashfromoperations（C）andcashinvestment（I）:

FreeCashFlow=C-I.ThedistinctionbetweenCandIisanaccrualaccountingissue,however,involvinganallocationtoperiodicincomestatementsthatdoesnotbearonnetcashgenerated.Todelineateclearlybetweencashandaccrualaccounting,ourreferencewillbetothenetcashfromoperations,thatis,freecashflow.However,attheendofthepaperwewilldistinguishbetweenCandItoexaminethepricingofcashfromoperations（C）withwhichpreviouspapershavelargelybeenconcerned.SowewilldenotefreecashflowasC-Iwiththereminderthatthisreferstothenetcashflowfromoperations.

1.1.2Accrualaccountingforthefirm

AccrualaccountingadjustsfreecashflowsfromoperationsonthelefthandsideofEq.1toyieldincomefromoperations,asfollows:

OI=（C-I）+I+Operatingaccruals………

（2）

Theadjustmentsareaddedtonetoperatingassetsonthebalancesheet:

△NOA=I+Operatingaccruals…......（3）

WhileEq.3distinguishesbetweencashinvestment（likepurchasesofequipment）andoperatingaccrualcomponentsofDNOA（likereceivablesandpayables）,cashinvestmentisreallyanaccrualthatallocatescur