The impact of equity share class on the information content of earnings and cash flows: Evidence from Mexico

Jose Miranda-Lopez, Isho Tama-Sweet

Research output: Contribution to journalArticlepeer-review

Abstract

We investigate the relative and incremental information content of earnings and cash flows in Mexico. Mexico provides a unique setting to test this relation because firms are allowed to issue different classes of equity shares which appeal to different investors. Share classes differentiate between investors based on nation of origin (domestic vs. foreign), voting rights and cash flow rights. We find that, for the market as a whole, both earnings and cash flows provide incremental information and earnings provide greater relative information. We also test these relations for each share class individually and find that cash flows provide the greatest amount of information when investors are at the greatest risk of expropriation.

Original languageEnglish
Pages (from-to)105-127
Number of pages23
JournalInternational Journal of Accounting, Auditing and Performance Evaluation
Volume14
Issue number2-3
DOIs
StatePublished - 2018

Keywords

  • Cash flows
  • Earnings
  • Firm size
  • Growth
  • Information content
  • Leverage
  • Mexico
  • Share class

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