How Volatilities of Cashflow and Accruals Effect on the Firm Value: The Korea Case

Abstract

We studied how volatilities of earnings, operating incomes, and accruals effect on the firm value in Korean capital market. In Korean capital market, volatilities of earnings, operating incomes, and accruals effect on the firm value negatively, and this result plays important roles to explain many corporate risk management activities. Unlike the existing risk measures―systematic risk and idiosyncratic risk, these volatilities is more useful since being calculated easily with financial statement. The result, that investors have no preference of the low earnings volatility through cash flow over that through accruals (non-cash flow), disagrees with results of previous studies. These result needs to be verified in further studies