We posit that investors and social media users place more weight on cash flows than on earnings for innovative small cap firms and that, in turn, innovative small cap firms (i) manage cash flows more than earnings, and (ii) disclose more cash flow than earnings information on social media. Using a matched sample of innovative and non-innovative small cap firms listed on the London’s Alternative Investment Market (AIM), we document that the value relevance of cash flows (earnings) is higher (lower) for innovative compared to non-innovative small cap firms. Link to the article
FILIP, A., GHIO, A. and PAUGAM, L. (2021). Accounting Information in Innovative Small Cap Firms: Evidence from London’s Alternative Investment Market. Accounting and Business Research, 51(4), pp. 421-456.