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The Case of the Telecommunication Industry","","Study investigates whether free cash flow (FCF) is value relevant for the telecommunication industry and which accounting-based FCF definition best predicts equity value. Evidence is drawn from 3,872 observations spanning 1988 to 2012. Results indicate FCF is not value relevant for the sector, consistent with parts of prior research. Findings aim to inform retail investors’ decision processes and support potential standard-setting actions to improve comparability across firms.",{"@graph":69,"@context":123},[70,84,106],{"@type":71,"itemListElement":72},"BreadcrumbList",[73,77,79,82],{"item":74,"name":75,"@type":76,"position":8},"https://docshare.wps.com","Home","ListItem",{"item":78,"name":9,"@type":76,"position":14},"https://docshare.wps.com/document/",{"item":80,"name":40,"@type":76,"position":81},"https://docshare.wps.com/document/research-report/",3,{"item":83,"name":65,"@type":76,"position":19},"https://docshare.wps.com/document/is-free-cash-flow-value-relevant-the-case-of-the-telecommunication-industry/297193/",{"url":83,"name":65,"@type":85,"image":86,"author":91,"headline":65,"publisher":94,"fileFormat":97,"inLanguage":63,"description":67,"dateModified":98,"datePublished":99,"encodingFormat":97,"isAccessibleForFree":100,"interactionStatistic":101},"DigitalDocument",{"url":87,"@type":88,"width":89,"height":90},"https://docshare.wps.com/thumbnails/is-free-cash-flow-value-relevant-the-case-of-the-telecommunication-industry/297193.png","ImageObject",300,407,{"name":92,"@type":93},"นรินทร์","Person",{"url":74,"name":95,"@type":96},"DocShare","Organization","application/pdf","2026-11-04","2026-09-18",true,{"@type":102,"interactionType":103,"userInteractionCount":105},"InteractionCounter",{"@type":104},"ViewAction",14,{"@type":107,"mainEntity":108},"FAQPage",[109,115,119],{"name":110,"@type":111,"acceptedAnswer":112},"What is the main research question of this study?","Question",{"text":113,"@type":114},"The study determines whether free cash flow (FCF) is value relevant for the telecommunication industry and, if so, which FCF definition is most value relevant for accounting users.","Answer",{"name":116,"@type":111,"acceptedAnswer":117},"What data and time period does the study use?",{"text":118,"@type":114},"It uses a sample of 3,872 observations covering the period from 1988 to 2012.",{"name":120,"@type":111,"acceptedAnswer":121},"What are the study’s results regarding value relevance of FCF?",{"text":122,"@type":114},"FCF is not value relevant for the telecommunication industry, aligning with some earlier research discussed in the literature review.","https://schema.org",{"og:url":83,"og:type":125,"og:title":65,"og:site_name":95,"og:description":67},"article",{"robots":127,"canonical":83},"index,follow",{"doc_id":129,"site_id":62},297193,1790373055,{"code":4,"msg":5,"data":132},{"doc_id":129,"user_id":133,"nickname":92,"user_avatar":134,"doc_module":4,"category_id":39,"category_name":40,"doc_title":65,"doc_description":67,"doc_content":135,"file_id":136,"file_url":137,"file_type":138,"file_size":139,"view_count":105,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":140,"language":141,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":142,"faqs":143,"seo_title":144,"seo_description":67,"update_tm":145,"read_time":146,"preview_page_count":4},2336475104957,"https://ap-avatar.wpscdn.com/avatar/22000c4c6bd8a5076e1?x-image-process=image/resize,m_fixed,w_180,h_180&k=1787554080175789136","Is Free Cash Flow Value Relevant? The Case of the Telecommunication Industry  \nMostafa M. Maksy  \nKutztown University of Pennsylvania  \nThis study attempts to determine whether free cash flow (FCF) is value relevant for the telecommunication industry and, if so, which FCF is the most value relevant. The results would help retail investors make better decisions, and may encourage accounting standards setters to require telecommunication companies to use a specific definition of FCF to enhance comparability. Using a sample of 3,872 observations covering the period from 1988 to 2012, the study shows that FCF is not value relevant for the telecommunication industry. This result is in agreement with some prior research as discussed in the literature review.  \nINTRODUCTION  \nPrior research is not conclusive as to whether free cash flow (FCF) is associated with stock prices, i.e., whether it is relevant to equity valuation. Furthermore, while the finance literature may have a somewhat uniform definition FCF, as the literature review below indicates, the accounting literature has a wide variety of definitions of FCF. The objective of this paper is to empirically determine whether any accounting definition of FCF has information content, or is value relevant, for the telecommunication sector of the economy. This study aims to provide two contributions to the literature. First, ifFCF is value relevant this would help investors make better decisions as they would use FCF in making their investment decisions. If it is not, then investors may not need to waste their time to include FCF in their decision making process. Second, the study aims to determine whether there is a specific definition of FCF that is most relevant to accounting information users in terms of predicting stock price changes. Since the major objective of financial reporting is to provide information that is useful for decisionmaking, the two contributions of this study would enhance the objective of accounting. Furthermore, identifying a specific definition of FCF that is most relevant may have major implications for financial accounting standard setters. While the Financial Accounting Standards Board (FASB) requires companies, in Statement of Financial Accounting Standard (SFAS) No. 95, to report Cash Flow from Operations (CFO) on the Statement of Cash Flows (SCF), it has so far discouraged companies from reporting CFO per share. The FASB is concerned that requiring, or even encouraging, companies to report CFO per share may be construed by some that it is moving away from accrual-basis accounting toward cash-basis accounting. Thus, it requires companies to report Earnings Per Share (EPS), which is based on accrual accounting, on the face of the Income Statement (I/S) but discourages companies from reporting CFO per share on the face of the SCF or anywhere else in the annual report. The results of this study might encourage the FASB to require companies to report a specific definition ofFCF (but not FCF per share) in the body of the SCF or in the supplementary disclosures at the bottom of the SCF, together  \nwith cash paid for income taxes and cash paid for interest expense. This requirement would prohibit companies from voluntarily disclosing FCF of whatever definition they prefer. Adhikari and Duru 2006 report that companies that voluntarily disclose FCF information use a wide variety of definitions of FCF (apparently, each company is using the definition that shows the highest amount of FCF) and these companies, on average, are less profitable and more leveraged than other firms in their own industries. Having all companies, in a given industry, reporting FCF that is calculated in the same way would enhance comparability of accounting information across firms. Because companies in a specific industry may spend more cash for capital expenditure or other investing activities than companies in a different industry, the author focuses the investigation in this study on ","cbCaicfO2gxBpsgv","https://ap.wps.com/l/cbCaicfO2gxBpsgv","pdf",684369,11,"English","# Introduction\n# Literature Review","[{\"question\":\"What is the main research question of this study?\",\"answer\":\"The study determines whether free cash flow (FCF) is value relevant for the telecommunication industry and, if so, which FCF definition is most value relevant for accounting users.\"},{\"question\":\"What data and time period does the study use?\",\"answer\":\"It uses a sample of 3,872 observations covering the period from 1988 to 2012.\"},{\"question\":\"What are the study’s results regarding value relevance of FCF?\",\"answer\":\"FCF is not value relevant for the telecommunication industry, aligning with some earlier research discussed in the literature review.\"}]","Is Free Cash Flow Value Relevant? The Case of the Telecommunication Industry | PDF",1789742215,28]