Do aggregate earnings components predict GDP growth better? An international setting comparison

• Main Authors: Atmini, Sari, Sumiyana, Sumiyana
• Format: Conference or Workshop Item
• Language: English
• Published: 2017
• Subjects: HF5601 Accounting
• Online Access: http://repo.uum.edu.my/21029/1/shsconf_four2017%201%207vvii.pdf; http://repo.uum.edu.my/21029/; http://doi.org/10.1051/shsconf/20173407006

This study investigates the usefulness of aggregate accounting earnings and their components to predict GDP growth.This study shows evidence that net income, net operating income, other comprehensive income, and net income change at aggregate level could predict GDP growth. This study splits sample into developed and developing countries.Almost all of aggregate earnings components could predict GDP growth in developed countries.On the contrary, only other comprehensive income and net income growth could predict it in developing countries. Moreover, sensitivity analysis shows evidence that the predictive power of accounting numbers are more consistently found in developed countries. It implies that all economic activities of firms listed in developed countries’ stock exchanges fully reflect to that of macro economy. This reflection is better than those of in developing countries. We infer that the value relevance of accounting earnings and their disaggregation have reached not only in the capital markets but also in the national macroeconomy level.Indeed, this prediction seems dominantly to be accurate in developed countries only.