Review of Accounting Studies

, Volume 21, Issue 2, pp 473–515 | Cite as

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

  • Bin Miao
  • Siew Hong Teoh
  • Zinan Zhu


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.


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

JEL Classification

G14 G38 M41 



We thank Richard Sloan (the editor) and two anonymous reviewers for insightful suggestions. We also thank Spencer Anderson, Wen Chen, Patty Dechow, Ronald Espinosa, Yaniv Konchitchki, An-Ping Lin, Paul Ma, Jonathan Nam, Joe Schroeder, Samuel Tan, Barrett Wheeler, and workshop participants at Arizona State University, Indiana University, University of California – Berkeley, and University of Minnesota for very helpful conversations and comments.


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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  1. 1.NUS Business SchoolNational University of SingaporeSingaporeSingapore
  2. 2.Paul Merage School of BusinessUniversity of California-IrvineIrvineUSA

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