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Value relevance of aggregated and disaggregated earnings in India: Significance of intangible intensity

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  • Kumari, Pooja
  • Mishra, Chandra Sekhar

Abstract

This paper explores the relative performance of aggregate earnings and disaggregated earnings components (accruals and cash flows) to describe the market values of equity and earning persistence in India. Further, we explore the difference in value relevance of earning and earning components to explain market values of equity and earning persistence between intangible and non-intangible intensive firms. We adopted the Barth et al. (1999, 2005) linear information structure, which is based on the Ohlson (1999) model. Our findings suggest that the disaggregated earnings outperform aggregated earnings to explain market values of equity and earning persistence, irrespective to the nature of a firm’s intangible intensity. However, the incremental explanatory power of disaggregated earnings is higher in intangible intensive firms compared to non-intangible intensive firms. Moreover, the incremental value relevance of accruals is higher than the incremental explanatory power of cash flows in intangible intensive firms and lower for non-intangible intensive firms.

Suggested Citation

  • Kumari, Pooja & Mishra, Chandra Sekhar, 2020. "Value relevance of aggregated and disaggregated earnings in India: Significance of intangible intensity," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 39(C).
    • Handle: RePEc:eee:jiaata:v:39:y:2020:i:c:s1061951820300227
    DOI: 10.1016/j.intaccaudtax.2020.100321
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