Gadjah Mada International Journal of Business (Sep 2003)

THE PREDICTIVE CONTENT OF DISAGGREGATED NORMAL INCOME: An Empirical Study in the JSX

  • Slamet Sugiri

DOI
https://doi.org/10.22146/gamaijb.5633
Journal volume & issue
Vol. 5, no. 3
pp. 363 – 379

Abstract

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The main objective of this study is to examine a hypothesis that the predictive content of normal income disaggregated into operating income and nonoperating income outperforms that of aggregated normal income in predicting future cash flow. To test the hypothesis, linear regression models are developed. The model parameters are estimated based on fifty-five manufacturing firms listed in the Jakarta Stock Exchange (JSX) up to the end of 1997.This study finds that empirical evidence supports the hypothesis. This evidence supports arguments that, in reporting income from continuing operations, multiple-step approach is preferred to single-step one.

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