Document Type : Research Article


1 M.Phil Scholar Superior Technical College Lahore

2 Department of Economics,The Islamia University of Bahawalpur Pakistan

3 Minhaj university lahore

4 Superior university lahore

5 Assistant Professor,Department of Economics,Ghazi University, Dera Ghazi Khan, Pakistan


In this study we examine the relative ability of comprehensive income and net income to summarize firm performance as reflected in stock returns. We also examine which comprehensive income adjustments get better the aptitude of income to summarize firm performance. We also examine this claim that income measured on a comprehensive basis is a better measure of firm performance than other summary income measures. The results do not show that comprehensive income is superior to net income for evaluating firm performance on the basis of stock return and price. Except for investment industrial group, In Tehran Stock Exchange, we found no evidence that comprehensive income for firm performance evaluation on the basis of cash flows prediction is superior to net income. While, we found the better results for the state companies (only in other companies group), i.e., firm performance evaluation on the basis of cash flows prediction using comprehensive income is superior to net income. Collectively, our results provide some weak evidence that show comprehensive income adjustments improve ability of income for reflecting firm performance.


Main Subjects

  1. Aboody, D., M.E., Barth, and R., Kasznik, 1999. “Revaluations of Fixed Assets and Future Firm Performance: Evidence From The UK”, Journal of Accounting and Economics 26, pp. 149-178.
  2. Ali, A. and P., Zarowin, 1992. The Role of Earnings Levels in Annual Earnings–Returns Studies. Journal of Accounting Research 30, pp. 286–296.
  3. Ali, A., Zarowin, P., 1991. Permanent Versus Transitory Components of Annual Earnings and Estimation Error in Earnings Response Coefficients. Journal of Accounting and Economics 15, pp. 249-264.
  4. Arab Mazar yazdi, Mohammad and Katreen Radmehr, 2003. “A Survey of the Significant and Necessity of Comprehensive Income Statement in Iran”, Iranian Accounting and Auditing Review 31, pp.51-73.
  5. Arab Mazar zazdi, Mohammad, 1995. “Information Content of Accruals and Cash Flows Information ”, Ph.D. Thesis, Tehran University.
  6. Bart, Mary E. and Greg Clinch, 2001. “Scale Effects in Capital Markets- Based Accounting Research”, Working Paper, Stanford University.
  7. Bernard, V.L., 1993. “Discussion of An Investigation of Revaluations of Tangible Long-Lived Assets”. Journal of Accounting Research 31, pp. 39–45.
  8. Biddle G. C. and J. Choi, 2003. “Is Comprehensive Income useful?”, Working paper under Review, Hong Kong university of Science & Technology, Hong Kong.
  9. Brief, R.P., and K.V. Peasnell, 1996. “Clean surplus: A link between accounting and finance”, Garland Publishing, New York.
  10. Brown Stephen, Lo Kin, Thomas Lys, 1999. “Use of R2 in accounting research: measuring changes in value relevance over the last four decades”, Journal of Accounting & Economics, university of British Columbia.
  11. Cahan Steven F., Stephen M. Courtenay, Paul L. Gronewoller, and David R. Upton, 2000. “Value Relevance of Mandated Comprehensive Income Disclosures”, Journal of Business Finance and Accounting (27:9 & 10), pp. 1273-1303.
  12. Dechow, P.M., 1994. “Accounting Earnings and Cash Flows as Measures of Firm Performance: The Role of Accounting Accruals”, Journal of Accounting and Economics 18, 3-42.
  13. Dhaliwal D., K.R. Subramanyam, R. Trezevant, 1999. “Is Comprehensive Income Superior to Net Income as a Measure of firm Performance?”, Journal of Accounting and Economics, 26, pp. 43-97.
  14. Easton, P.D. and T.S., Harris, 1991. Earnings as Explanatory Variables for Returns. Journal of Accounting Research 29, PP. 19–36.
  15. Easton, P.D., P.H., Eddey and T.S., Harris, 1993. “An Investigation of Revaluations of Tangible Long-Lived Assets”. Journal of Accounting Research 31, pp. 1–38.
  16. Financial Accounting Standards Board, 1985. “Statement of Financial Accounting Concepts No. 6: Elements of Financial Statements” (Norwalk, CT: Financial Accounting Foundation).
  17. Financial Accounting Standards Board, 1997. “Statement of Financial Accounting Standard No. 130: Reporting Comprehensive Income”, Financial Accounting Standards Board, Norwalk, CT.
  18. Harris, M.S. and K.A. Muller, 1999. “The Market Valuation of IAS versus US-GAAP Accounting Measures Using Form 20-F Reconciliation”, Journal of Accounting and Economics 26, pp. 285-312
  19. Kanagaretnam Kiridaran, Robert Mathieu, Mohamed Shahata, 2004. “Usefulness Of Comprehensive Income Reporting in Canada”, Working Paper, McMaster University.
  20. Kotari, S.P. and J.L. Zimmerman, 1995. “Price and return Models”, Journal of Accounting and economics, 20, pp. 155-192.
  21. Kothari, S.P., 1992. Price Earnings Regressions in The Presence of Prices Leading Earnings: Implications for Earnings Response Coefficients. Journal of Accounting and Economics 15, pp. 173–202.
  22. Lev, B., 1989. “On the usefulness of earnings: Lessons and directions from two decades of empirical research”, Journal of Accounting Research 27 (supplement), 153-192.
  23. Louis, Henock, 2003. “The value relevance of the foreign translation adjustment”, Working Paper, The Pennsylvania State University.
  24. Maines, L. A. and L. S. Mcdaniel, 2000. “Effects of Comprehensive Income Characteristics on Nonprofessional Investors` Judgments: The Role of financial Statement presentation format”, Accounting Review, 75 (April), pp. 179-207.
  25. Mojtahed zadeh, vida. and Marzieh Momeni,2003. “The Effect of the Comprehensive Income Statement on the Decisions of the Financial Statement Users: Views & Perspectives ”, Iranian Accounting and Auditing Review 31, pp. 75-96.
  26. Ohlson, J., 1995. “Earnings, Book values, and Dividends in Security valuation”, Contemporary Accounting Research (Spring), pp. 661-86.
  27. Ohlson, J.A. and P., Shroff, 1992. Changes Versus Levels in Earnings as Explanatory Variables for Returns: Some Theoretical Considerations. Journal of Accounting Research 30, pp. 210–226.
  28. Robinson L. E., 1991. “The Time Has Come to Report Comprehensive Income”, Accounting Horizons 5(June), pp. 107-112.
  29. Smith P. A., and C. L. Reither, 1996. “Comprehensive Income and the Effect of Reporting It”, Financial Analysts Journal, 52, pp. 14-20.
  30. Subramanyam, K.R., 1996. “The Pricing of Discretionary Accruals”, Journal of Accounting and Economics 22, pp. 249-281.
  31. Vuong, Quang H., 1989. “Likelihood ratio tests for model selection and non-nested hypotheses”, Econometrica 57, 307-333.
  32. Basheer, M., Ahmad, A., & Hassan, S. (2019). Impact of economic and financial factors on tax revenue: Evidence from the Middle East countries. Accounting, 5(2), 53-60.
  33. Basheer, M. F. (2014). Impact of Corporate Governance on Corporate Cash Holdings: An empirical study of firms in manufacturing industry of Pakistan. International Journal of Innovation and Applied Studies, 7(4), 1371.
  34. bin Hidthiir, M. H., Basheer, M. F., & Hassan, S. G. (2019). The Simultaneity of Corporate Financial Decisions Under Different Levels of Managerial Ownership: A Case of Pakistani Listed Firms. Research in World Economy, 10(2).