Is comprehensive income superior to net income as a measure of firm performance?

Dan S Dhaliwal, K. R. Subramanyam, Robert Trezevant

Research output: Contribution to journalArticle

151 Citations (Scopus)

Abstract

With the exception of financial firms, we find no evidence that comprehensive income is more strongly associated with returns/market value or better predicts future cash flows/income than net income. Moreover, the only component of comprehensive income that improves the association between income and returns is the marketable securities adjustment. Our results do not support the claim that comprehensive income is a better measure of firm performance than net income. Our results also raise questions about the appropriateness of items included in SFAS 130 comprehensive income as well as the need for mandating uniform comprehensive income disclosures for all industries.

Original languageEnglish (US)
Pages (from-to)43-67
Number of pages25
JournalJournal of Accounting and Economics
Volume26
Issue number1-3
StatePublished - Jan 1999

Fingerprint

Firm performance
Comprehensive income
Net income
Income
Cash flow
Appropriateness
Industry
Disclosure
Market value

Keywords

  • Capital markets
  • Comprehensive income
  • M41
  • SFAS 130
  • Summary measures of performance

ASJC Scopus subject areas

  • Accounting
  • Economics and Econometrics
  • Finance

Cite this

Is comprehensive income superior to net income as a measure of firm performance? / Dhaliwal, Dan S; Subramanyam, K. R.; Trezevant, Robert.

In: Journal of Accounting and Economics, Vol. 26, No. 1-3, 01.1999, p. 43-67.

Research output: Contribution to journalArticle

Dhaliwal, Dan S ; Subramanyam, K. R. ; Trezevant, Robert. / Is comprehensive income superior to net income as a measure of firm performance?. In: Journal of Accounting and Economics. 1999 ; Vol. 26, No. 1-3. pp. 43-67.
@article{8f02bad20de44427a38a4a79343c10b9,
title = "Is comprehensive income superior to net income as a measure of firm performance?",
abstract = "With the exception of financial firms, we find no evidence that comprehensive income is more strongly associated with returns/market value or better predicts future cash flows/income than net income. Moreover, the only component of comprehensive income that improves the association between income and returns is the marketable securities adjustment. Our results do not support the claim that comprehensive income is a better measure of firm performance than net income. Our results also raise questions about the appropriateness of items included in SFAS 130 comprehensive income as well as the need for mandating uniform comprehensive income disclosures for all industries.",
keywords = "Capital markets, Comprehensive income, M41, SFAS 130, Summary measures of performance",
author = "Dhaliwal, {Dan S} and Subramanyam, {K. R.} and Robert Trezevant",
year = "1999",
month = "1",
language = "English (US)",
volume = "26",
pages = "43--67",
journal = "Journal of Accounting and Economics",
issn = "0165-4101",
publisher = "Elsevier",
number = "1-3",

}

TY - JOUR

T1 - Is comprehensive income superior to net income as a measure of firm performance?

AU - Dhaliwal, Dan S

AU - Subramanyam, K. R.

AU - Trezevant, Robert

PY - 1999/1

Y1 - 1999/1

N2 - With the exception of financial firms, we find no evidence that comprehensive income is more strongly associated with returns/market value or better predicts future cash flows/income than net income. Moreover, the only component of comprehensive income that improves the association between income and returns is the marketable securities adjustment. Our results do not support the claim that comprehensive income is a better measure of firm performance than net income. Our results also raise questions about the appropriateness of items included in SFAS 130 comprehensive income as well as the need for mandating uniform comprehensive income disclosures for all industries.

AB - With the exception of financial firms, we find no evidence that comprehensive income is more strongly associated with returns/market value or better predicts future cash flows/income than net income. Moreover, the only component of comprehensive income that improves the association between income and returns is the marketable securities adjustment. Our results do not support the claim that comprehensive income is a better measure of firm performance than net income. Our results also raise questions about the appropriateness of items included in SFAS 130 comprehensive income as well as the need for mandating uniform comprehensive income disclosures for all industries.

KW - Capital markets

KW - Comprehensive income

KW - M41

KW - SFAS 130

KW - Summary measures of performance

UR - http://www.scopus.com/inward/record.url?scp=0003202114&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=0003202114&partnerID=8YFLogxK

M3 - Article

AN - SCOPUS:0003202114

VL - 26

SP - 43

EP - 67

JO - Journal of Accounting and Economics

JF - Journal of Accounting and Economics

SN - 0165-4101

IS - 1-3

ER -