The ability of earnings, cash flows and accruals in predicting future cash flows - A study on VietNam lusted from 2011 to 2015

Abstract

This thesis aims to investigate the predictive ability of earnings, cash flows together with accruals towards future cash flows in Vietnamese context. Data of this study is collected from financial statements of 298 firms listed on Ho Chi Minh Stock Exchange (HOSE) and Hanoi Stock Exchange (HNX) from 2011 to 2015. Firstly, by using single and multiple regression with panel data approach, this paper will explore whether there exists a relationship of earnings, cash flows and accruals with future cash flows. Then the predictive power would be examined by analyzing adjusted R-squared of the regression result. Eventually, the result shows that earnings with 2-year lag, cash flows and accruals all have an impact on cash flows in the future and the model of cash flows and accruals with longer time horizon has the strongest explanatory power to future cash flows.