Investigating the Information content of Earnings and Cash and Accruals Components in Explaining Market Value of Firms

One of the most important purposes of financial reporting is to provide some information about the company’s performance which is measured by earnings and its components. Therefore, this study was designed to evaluate information on earnings and its components in order to clarify the market value of the companies listed in Tehran Stock Exchange. To this end, the information of 88 companies from 1383 to 1390 (a period of eight years) was studied. The results drawn from testing the research hypotheses revealed that accruals and cash flows had a significant correlation with the companies’ market value. Among the earnings’ components, accruals provide more information for explaining the companies’ market value in comparison with operating cash flow. The other result of this study suggested that non-discretionary accruals had more information content compared to discretionary accruals. Moreover, the overall result indicated that regarding the prediction of companies’ market value, the explanatory power of the earnings’ components was greater than that of the mount of earnings.