Have accounting numbers lost their value relevance during the recent financial credit crisis?

The objective of this paper is to examine the relative and incremental value relevance of cash flows from operations (CFO) around the recent financial credit crisis (pre, during, and post crisis periods). Based on a sample of UK FTSE 350, the study reassures the accounting literature that accounting numbers have not lost their value relevance over time. In particular, the findings show a significantly incremental association between firms' market values on one hand, and book value (BV), Earning Per Share (EPS) and CFO, on the other hand, over all intervals examined. Further, the study provides new evidence that CFO has relative value relevance to both BV and EPS over all periods (pre, during, and post credit crisis period) to explain the cross variations in firms' market values. Finally, our findings provide strong evidence about the superiority of the value relevance of CFO over the cash flows from investing and financing activities although the cash flows from investing activities reveal a higher explanatory power in the crisis period. The results provide great insights for the extant literature and reaffirms the usefulness of accounting information in making investment decisions.