The effect of cash flow statement format on lenders' decisions

Helen KWOK

Research output: Journal PublicationsJournal Article (refereed)peer-review

16 Citations (Scopus)


This study investigates bank loan officers' use of financial information and reports, in particular, cash flow information and the statement of cash flow (SCF), in making lending decisions. Subjects were drawn from four groups of frequent users of financial reports-bank loan officers, auditors, financial analysts and accounting academics. Each subject was presented with the annual reports of two loan applicant companies to make two independent lending decisions based on the information provided. The SCF of one of the companies was presented in the direct format, while the other was presented in the indirect format. The indirect format of SCF was used as a surrogate for the funds flow statement. Results show that, while cash flow was the second most used financial information, the majority of the subjects obtained this information from financial statements other than the SCF, notably, the balance sheet. In terms of financial report usage, notes to the financial statements, rather than the SCF, was most frequently used. No subject made use of the incremental information provided in the SCF presented in the direct format. The results suggest that loan officers do not use the cash flow information provided by the SCF, but rely on the accounting information provided in the FFS and accrual-based financial reports.
Original languageEnglish
Pages (from-to)347-362
Number of pages16
JournalInternational Journal of Accounting
Issue number3
Publication statusPublished - 2002


  • Fund flow statement
  • Lending decision
  • Statement of cash flow
  • Statement of changes in financial position
  • Verbal protocol analysis


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