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Author: | Kallunki, J-P. Martikainen, M. Martikainen, T. |
Title: | Accounting income, income components and market-to-book equity ratios: Finnish evidence |
Journal: | International Journal of Accounting
1998 : VOL. 33:3, p. 359-375 |
Index terms: | ACCOUNTING RESEARCH STOCK MARKETS INCOMES INVESTMENTS FINLAND |
Language: | eng |
Abstract: | This paper examines which income levels and components are related to the market-to-book equity ratios in Finland. The findings suggest that income statement items other than "bottom-line" earnings contain useful information when investors are creating cash flow expectations for Finnish companies. Because of the wide earnings management possibilities, the Finnish data also provides an opportunity to test the importance of income management in creating investors' cash flow expectations. The results indicate that investors split accounting earnings into components and evaluate temporary nature of income statement items when creating cash flow expectations for firms. To better understand the relationships between accounting variables and stock market data it is useful to split accounting income into components. |
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