Title

e-Commerce and taxation: Past, present and future

Document Type

Article

Publication Date

2012

Department

Accounting and Finance

Abstract

This paper examines the relation between security returns, industry-wide cash flows and accruals, and firm-specific cash flows and accruals during the period 1991-2001. We first replicate Ayers & Freeman’s (1997) findings that returns are significantly associated with industry earnings and this association begins and ends earlier than returns associated with firm earnings. We hypothesize the components of industry earnings - cash flows and accruals - are significantly associated with stock returns. Consistent with this hypothesis we find that both industry-wide cash flows and industry-wide accruals are significantly associated with returns and this association begins and ends earlier than returns associated with firm-specific cash flows and accruals. Contrary to expectations, we find no significant difference between industry-wide cash flows and industry-wide accruals. Finally, we hypothesize and find that industry-wide accruals are more value relevant than firm-specific accruals in years t and t+1. Collectively, these findings suggest industry-wide cash flows and accruals are value relevant; however, disaggregating industry earnings into its cash flow and accrual components is unnecessary as it does not provide incremental explanatory power beyond that of industry earnings. All data are publicly available from the sources identified in the paper.

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