Comparative Value-Relevance of GAAP, IBES, S&P Core, Cash Earnings and Cash Flows

55 Pages Posted: 5 Jan 2013

See all articles by Dominic Gasbarro

Dominic Gasbarro

Murdoch University

Gary S. Monroe

University of New South Wales (UNSW) - Australian School of Business

Robert G. Schwebach

Colorado State University, Fort Collins - College of Business

Seng Thiam Teh

Australian National University (ANU)

Date Written: January 3, 2013

Abstract

This study examines the impact the global financial crisis had on the value relevance of GAAP and non-GAAP earnings. We adopt the Ohlson (1995) valuation and CAR models to test the value relevance and information content of alternative earnings measures. We use six different earnings measures comprising IBES earnings, Standard & Poor’s (S&P) core earnings, cash earnings, cash flows from operations, earnings from operations adjusted to exclude special items under GAAP and income before extraordinary items under GAAP. We draw our sample from US publicly traded firms between 2002 and 2010. Our sample is partitioned into Financial and non-Financial firms, and S&P 500 and non-S&P 500 firms. The results show that investors place greater value relevance on GAAP earnings during the GFC period relative to the pre-GFC period.

Keywords: value relevance, GAAP, Non-GAAP Earnings, GFC

Suggested Citation

Gasbarro, Dominic and Monroe, Gary S. and Schwebach, Robert G. and Teh, Seng Thiam, Comparative Value-Relevance of GAAP, IBES, S&P Core, Cash Earnings and Cash Flows (January 3, 2013). Available at SSRN: https://ssrn.com/abstract=2195959 or http://dx.doi.org/10.2139/ssrn.2195959

Dominic Gasbarro

Murdoch University ( email )

South Street
Murdoch 6150, Western Australia
Australia

Gary S. Monroe

University of New South Wales (UNSW) - Australian School of Business ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia
+61293856443 (Phone)

Robert G. Schwebach

Colorado State University, Fort Collins - College of Business ( email )

Dept. of Finance & Real Estate
Fort Collins, CO 80523
United States
970-491-5547 (Phone)
970-491-7665 (Fax)

Seng Thiam Teh (Contact Author)

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601
Australia

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