1、中文 3700 字 外 文 翻 译 原文 ： The pricing of earnings and cash flows and an affirmation of accrual accounting This paper examines a core idea in accounting, drummed into every beginning accounting student: accrual accounting, rather than cash accounting, is appropriate for business reporting. Accounting go
2、es beyond a mere cash book, to report (accrual) earnings rather than cash flow as the measure of valued added. The paper investigates whether common shares are priced in the stock market according to accounting prescriptions on how earnings and cash flows affect shareholders equity. To develop an em
3、pirical specification that incorporates the prescriptions, the paper first formally lays out how earnings and cash flows relate to shareholders equity in the accounting system. With a focus on the shareholder, it makes the standard distinction in both valuation theory and accounting between the busi
4、ness and the equity claim on the business. Under accrual accounting, earnings from the business add to both the book value of assets and the book value of the equity claim on those assets. This, of course, is well appreciated. Less appreciated, however, are prescriptions about cash flow that are imb
5、edded in accrual accounting: net cash flow from a businesscommonly referred to as free cash flowhas no effect of the book value of the equity (we show) but reduces the book value of business assets, dollar- for- dollar. Accrual accounting treats cash flow not as an addition to business value but as
6、a payout from the business. That payout reduces the value of business without affecting the cum-dividend value of the equity. The empirical analysis shows that the stock market prices business firms and equity claims on firms according to this prescription. We find that, on average, annual changes i
7、n both the market value of the firm and the market value of equity shares are positively related to annual earnings. However, given earnings, changes in the market value of the firm are negatively related to cash flows from the firm. Indeed, a dollar of free cash flow is, on average, associated with
8、 approximately a dollar less in market value of the firm, while changes in the market value of equity are unrelated to the free cash flow that business generates. Furthermore, separating out the investment portion of flow free cash flow, we find that the remaining cash flow from operations is also a
9、ssociated with lower market value for the firm, dollar-for-dollar, and is unrelated to changes in equity value. The result with respect to earnings is, of course, not new； the finding of a positive correlation between earnings changes and stock returns in the Ball and Brown (1968) paper is an affirm
10、ation of accrual accounting, replicated many times. Dechow (1994) and Dechow et al. (1998), among others, affirm the importance of accruals over cash flows under a variety of conditions. Our analysis explores an additional feature of accounting: not only does accrual accounting promote earnings as t
11、he primary valuation attribute (rather than cash flows), but actually treats cash flows as irrelevant to equity valuation. Our empirical analysis affirms. The result with respect to cash flows may be surprising, for one typically thinks of cash flow as a goodmore cash flow means higher valueand anal
12、ysts often recommend stocks of companies that have positive cash flow. However, our results are not surprising when one recognizes that economic theory also affirms the accounting: accrual accounting operates in a way that recognizes Miller and Modigliani (1961) notion of dividend displacement and t
13、he complementary notion of dividend irrelevance. Just as dividends, the distribution of cash to shareholders, reduce the equity claim but do not affect the cum-dividend value of equity, free cash flow, the corresponding distribution from the firm (to all claimants), is a dividend from the firm that
14、reduces the value of the firm but does not affect the cum-dividend value of the firm. Because the equity claim is on both the value of the firm and the cash flow, it is unaffected by the cash flow but rather by the cum-dividend value of the firm. In short, accrual accounting honors the foundational
15、principles of modern finance, and the stock market prices firms and equity claims according to these principles. The results in the paper seemingly conflict with previous research. In Rayburn (1986), Wilson (1987), Dechow (1994), Bowen et al. (1987), Clubb (1995), and Francis et al. (2003), among ot
16、hers, cash flow variables in return regressions load with a positive coefficient, with and without earnings included. The difference revolves around the issue of specification. This paper develops a regression specification quite methodically (in Sect. 1) so the differences are well understood. Inde
17、ed, while the pricing of earnings and cash flows is our substantive concern, the issue of specification in capital market research is a subtext. In this respect, the paper responds to the Holthausen and Watts (2001) criticism that capital markets research in accounting has had little to contribute t
18、o normative issues faced by standard setters. With attention to specificationwhich Holthausen and Watts argue is necessarywe are able to draw conclusions about a very basic normative issue, the use of cash accounting versus accrual accounting for business reporting. Our result in no way nullifies th
19、e results in other papers； indeed, we are able to reconcile what look like very different findings to the earlier results. The ability of earnings to explain changes in market values depends, of course, on how the earnings are measured. Indeed, one expects cash flow to be informative if earnings are
20、 poorly measured, and the comparison of cash flow to earnings is a standard diagnostic in earnings quality analysis (see, for example, Sloan 1996； Dechow and Dichev 2002； Dechow et al. 2008). We build specifications that explicitly recognize that cash flows (and dividends) can have information conte
21、nt in response to poor earnings measurement. Nevertheless, using US GAAP earnings measures, we find that cash flows, on average, do not explain changes in stock prices. The emphasis that the findings apply on average is important, for GAAP is (presumably) designed for broad application in the cross-
22、section. The average result in no way abrogates the findings that accrual accounting may be deficient and cash flows relevant in particular contexts. 1 Specification of return regressions involving earnings and cash flows While documenting the relevant correlations, most prior research that relates
