On the individual and incremental information content of accrual earnings, cash flows and cash dividends in the Finnish stock market

This paper investigates the informational characteristics of accrual earnings, cash flow-based earnings and cash dividend releases in the Finnish stock market. First the separate effects of the information sources are studied and second, the incremental information of these announcements is investigated. The results indicate that the market has typically reached in the same direction as the signs of the unexpected net income, cash flow or cash dividend figures suggest. However, significant time-series variation due to the structural changes in the Finnish stock market is detected in the results. Especially, with regard to the cash dividend information, it seems that the semi-strong efficiency of the Finnish stock market has not been fulfilled. Alternatively, this result may be due to the serious problems in risk estimation, or due to the impressively high average returns in the Finnish stock market during the research period. The incremental information content of cash dividends and accounting figures is also evaluated. The results suggest that these items of corporate financial information contain at least to some degree different information with respect to each other. In addition, a significant time-series variation of the obtained results is again reported.