Accrual, Cash Flow Data And Share Price: An Examination During Different Economic Conditions In Saudi Arabia

There are two widely accepted approaches used to predict the stock price of a business’s equity. The accounting approach assumes that the predictive ability of a company's earnings out-performs the cash flows to predict share prices. A financial model assumes that cash flows are a better tool f...

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Main Author:	Nuri S. A. Salem
Format:	Thesis
Language:	en_US
Subjects:	Accrual basis accounting > Saudi Arabia Cash flow > Saudi Arabia Stocks > Prices > Saudi Arabia
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spelling	my-usim-ddms-128352024-05-29T05:00:34Z Accrual, Cash Flow Data And Share Price: An Examination During Different Economic Conditions In Saudi Arabia Nuri S. A. Salem There are two widely accepted approaches used to predict the stock price of a business’s equity. The accounting approach assumes that the predictive ability of a company's earnings out-performs the cash flows to predict share prices. A financial model assumes that cash flows are a better tool for forecasting future stock prices. The motivation of this paper is to discover whether the accrual accounting components or the cash flow components provide a better explanation for estimating the share price of non-financial companies listed on the Saudi Stock Exchange (SSE), an emerging capital market of Saudi Arabia during various economic conditions; pre-global financial crisis, during the global financial crisis and after the global financial crisis. Five hypotheses were developed and regression analysis was used to test the hypothesized relationships. Annual data used in this study were collected from the financial statements of 90 non-financial companies listed on the Stock Exchange of Saudi Arabia from 2007 to 2011. The regression results found that the accrual components have a better predictive power than cash flow components to forecast Saudi stock prices before, during and after the global financial crisis. In addition, accrual components are incrementally informative beyond cash flow components in predicting share prices during the crisis period and non-crisis. Furthermore, the results also led to a conclusion that there is sufficient evidence to prove that the accrual components are more persistent than the cash flow components in explaining the variations of the share price before, during and after the global financial crisis. The results of this thesis can be used as evidence to support the theory in financial analysis such as the efficient markets theory, the free cash flow theory, the traditional financial theory and the theory underlying the relationship between earnings and stock price. Universiti Sains Islam Malaysia 2014 Thesis en_US https://oarep.usim.edu.my/handle/123456789/12835 https://oarep.usim.edu.my/bitstreams/9b6f38ec-7acf-457b-90a5-d44ac378f0ae/download 8a4605be74aa9ea9d79846c1fba20a33 Accrual basis accounting--Saudi Arabia Cash flow--Saudi Arabia Stocks--Prices--Saudi Arabia
institution	Universiti Sains Islam Malaysia
collection	USIM Institutional Repository
language	en_US
topic	Accrual basis accounting--Saudi Arabia Cash flow--Saudi Arabia Stocks--Prices--Saudi Arabia
spellingShingle	Accrual basis accounting--Saudi Arabia Cash flow--Saudi Arabia Stocks--Prices--Saudi Arabia Nuri S. A. Salem Accrual, Cash Flow Data And Share Price: An Examination During Different Economic Conditions In Saudi Arabia
description	There are two widely accepted approaches used to predict the stock price of a business’s equity. The accounting approach assumes that the predictive ability of a company's earnings out-performs the cash flows to predict share prices. A financial model assumes that cash flows are a better tool for forecasting future stock prices. The motivation of this paper is to discover whether the accrual accounting components or the cash flow components provide a better explanation for estimating the share price of non-financial companies listed on the Saudi Stock Exchange (SSE), an emerging capital market of Saudi Arabia during various economic conditions; pre-global financial crisis, during the global financial crisis and after the global financial crisis. Five hypotheses were developed and regression analysis was used to test the hypothesized relationships. Annual data used in this study were collected from the financial statements of 90 non-financial companies listed on the Stock Exchange of Saudi Arabia from 2007 to 2011. The regression results found that the accrual components have a better predictive power than cash flow components to forecast Saudi stock prices before, during and after the global financial crisis. In addition, accrual components are incrementally informative beyond cash flow components in predicting share prices during the crisis period and non-crisis. Furthermore, the results also led to a conclusion that there is sufficient evidence to prove that the accrual components are more persistent than the cash flow components in explaining the variations of the share price before, during and after the global financial crisis. The results of this thesis can be used as evidence to support the theory in financial analysis such as the efficient markets theory, the free cash flow theory, the traditional financial theory and the theory underlying the relationship between earnings and stock price.
format	Thesis
author	Nuri S. A. Salem
author_facet	Nuri S. A. Salem
author_sort	Nuri S. A. Salem
title	Accrual, Cash Flow Data And Share Price: An Examination During Different Economic Conditions In Saudi Arabia
title_short	Accrual, Cash Flow Data And Share Price: An Examination During Different Economic Conditions In Saudi Arabia
title_full	Accrual, Cash Flow Data And Share Price: An Examination During Different Economic Conditions In Saudi Arabia
title_fullStr	Accrual, Cash Flow Data And Share Price: An Examination During Different Economic Conditions In Saudi Arabia
title_full_unstemmed	Accrual, Cash Flow Data And Share Price: An Examination During Different Economic Conditions In Saudi Arabia
title_sort	accrual, cash flow data and share price: an examination during different economic conditions in saudi arabia
granting_institution	Universiti Sains Islam Malaysia
_version_	1812444808997765120

Accrual, Cash Flow Data And Share Price: An Examination During Different Economic Conditions In Saudi Arabia

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