The informativeness of U.S. banks’ statements of cash flows

This research paper investigates the informativeness of U.S. bank statements of cash flows (SCFs), a topic long debated by banks, users of financial statements, and accounting standard setters. The study empirically examines the incremental value relevance of SCFs beyond income statements and balance sheets, comparing bank SCFs to those of industrial firms. It also assesses the distress-predictive power of bank SCFs, particularly during the 2008 financial crisis. The findings reveal limited incremental value relevance and distress-predictive power for bank SCFs, suggesting they offer little additional information for valuation or distress prediction. The authors propose potential policy implications, such as allowing tailored SCF formats for banks.

Source: Gao, Z., Li, W., & O’Hanlon, J. (2019). The informativeness of U.S. banks’ statements of cash flows. Journal of Accounting Literature, 43, 1–18.