Comparison of Incremental Power of Parent Company Earnings to Subsidiary Earnings in Predicting Consolidated Earnings

Predicting consolidated earnings provides useful information to evaluate a parent company, since earnings of the entire consolidated entity accrue to parent company shareholders in the form of dividends. Using earnings prediction approach and reported earnings levels in subsidiary and parent company income statements, this study provides empirical evidence on the prediction of consolidated earnings. The sample includes all firms listed in Tehran Stock Exchange over the period of 2003-2009. All the firms had already prepared consolidated financial statements according to Iran accounting Standard No.18. The results show that subsidiary earnings have less power than the parent earning in predicting consolidated earnings.