THE INFORMATION CONTENT OF NET INCOME, TOTAL COMPREHENSIVE INCOME AND CASH FLOW ON THE STOCK PRICE AND RETURNS OF FIRMS LISTED ON THE STOCK EXCHANGE OF THAILAND
Keywords:
Information Content, Net Income, Comprehensive Income, Cash FlowAbstract
The purpose of this study is to examine 1) the relative information content in explaining stock price and returns based on net income and total comprehensive income, and 2) the incremental information content of other comprehensive income and cash flow in explaining stock price and returns. The sample includes 930 firm-year observations of companies listed on the Stock Exchange of Thailand between 2017 and 2021. The analysis applies the Ohlson (1995) price model and the Easton and Harris (1991) return model. The relative information content is assessed using the adjusted R-squared values, while the incremental information content is assessed using the statistical significance of the regression coefficients. The empirical results show that net income exhibits greater relative information content than comprehensive income in explaining stock prices. Conversely, comprehensive income demonstrates superior explanatory power over net income when explaining stock returns. Furthermore, gains and losses from equity investments measured at fair value through OCI, in conjunction with cash flows from operating, investing, and financing activities, provide significant incremental information beyond net income in explaining stock prices. However, these components do not provide substantial incremental explanatory power concerning stock returns.
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