The Use of Reported Cash Flows versus Earnings to Predict Cash Flows: Preliminary Evidence from Qatar

The study aims to empirically investigate the predictive ability of reported cash flows versus earnings to predict future cash flows in a market situated in a high growth rate economy such as Qatar. The sample of the study consists of companies on the Doha Securities Market (Qatar Exchange) for the period 2004-09. Qatar is a very interesting context to explore especially after the quick reputation it is gaining at the international scene. We provide evidence on the ability of earnings and cash flow measures to forecast one period or two-period ahead cash flows. However, the results support the superiority of cash flows over earnings in predicting future cash flows. Furthermore, with the exception of CFOP, our research model reports that CFFIA and CFFA are better predictors of themselves. NIDPR – A traditional cash flow measure is a good predictor of CFOP. Finally empirical findings show that cash flow measures and earnings are not correlated suggesting the specificities of each are different.