Cash Flows and the Product Life Cycle

M. Waldron,
C. Jordan, University of Southern Mississippi

ABSTRACT. The majority of prior research studies investigating the comparative predictive ability of accrual earnings versus cash flows indicates that accrual earnings provide superior predictions of future cash flows. The present research examines product life cycle (PLC) theory and expectations during the IT Bubble to enhance an understanding of cash flow prediction.

Results overall indicate that cash flows provide superior predictions relative to accrual earnings. However, analysis of three industries at differing PLC stages indicates accrual earnings are relatively superior for a growth-stage industry compared to that of other PLC stages. Evidence supports the existence of earnings management, expectation effects and a decreasing value relevance for accrual accounting.

Full-Text is no longer available online. Please contact the author(s) for more information about this manuscript.

Back to Session Listing