Limited attention, statement of cash flow disclosure, and the valuation of accruals

Bin Miao, Siew Hong Teoh, Zinan Zhu

Research output: Journal article publicationJournal articleAcademic researchpeer-review

29 Citations (Scopus)


We test for the effect of limited attention on the valuation of accruals by comparing the immediate and long-term market reactions to earnings announcements between a subsample of firms that disclose only the balance sheet with a subsample of firms that disclose both the balance sheet and the statement of cash flows (SCF) in the earnings press release. Information about accruals generally can be inferred from comparative balance sheets, but the availability of the SCF makes accruals more salient and easier to process for investors with limited attention. Controlling for potential additional information and endogeneity of SCF disclosure, we find strong evidence that SCF disclosure enables more efficient pricing of accruals. Further analyses using a proxy for investor sophistication suggest that, when SCF is absent from the earnings press release, less sophisticated investors fail to discount accruals but sophisticated investors do.
Original languageEnglish
Pages (from-to)473-515
Number of pages43
JournalReview of Accounting Studies
Issue number2
Publication statusPublished - 1 Jun 2016
Externally publishedYes


  • Accrual valuation
  • Cash flow disclosure
  • Information processing cost
  • Limited attention
  • Salience
  • Voluntary disclosure

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting(all)


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