arbiter
JournalsAccount

Predictive Ability of Earnings from Business-Type Activities: Evidence from State Governments

Won Jung Kim

Accounting Horizons2026https://doi.org/10.2308/horizons-2024-091article
AJG 3ABDC A
Weight
0.50

Abstract

SYNOPSIS I examine whether accrual-based earnings from business-type activities in U.S. state governments help predict future operating cash flows. Although these activities are financially significant, their usefulness in assessing cash flow prospects is not well understood. Using data from state government financial statements, I find that accrual-based earnings, particularly operating income, predict future operating cash flows as effectively as current cash flow measures. Their predictive ability weakens over longer horizons and varies across states. Results indicate that operating cash flows and accrual-based earnings provide comparable information about future cash flows, whereas broader measures that include nonoperating or transfer-related items, such as change in net position, are less informative. Macroeconomic factors, including the COVID-19 period, significantly affect these relationships. These findings offer insights for state financial officers, auditors, and regulators evaluating the usefulness of GAAP-based performance measures in assessing governments’ future cash-generating capacity. Data Availability: All data used in this study are publicly available. JEL Classifications: H71; H72; H83; M48.

Open via your library →

Cite this paper

https://doi.org/https://doi.org/10.2308/horizons-2024-091

Or copy a formatted citation

@article{won2026,
  title        = {{Predictive Ability of Earnings from Business-Type Activities: Evidence from State Governments}},
  author       = {Won Jung Kim},
  journal      = {Accounting Horizons},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.2308/horizons-2024-091},
}

Paste directly into BibTeX, Zotero, or your reference manager.

Flag this paper

Predictive Ability of Earnings from Business-Type Activities: Evidence from State Governments

Flags are reviewed by the Arbiter methodology team within 5 business days.

Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.