This study investigates whether other comprehensive income (OCI) reported in the statement of comprehensive income (one of the main financial statements after the adoption of K-IFRS) predicts a firm’s future performance. Using the quarterly data of Korean listed companies, we examine the association between OCI estimates and future earnings. First of all, we find that OCI is positively associated with earnings in both 1- and 2-quarter ahead, supporting the predictive value of OCI. When we break down OCI into its individual components, our results suggest that the net unrealized gains/losses on available-for-sale (AFS) investment securities are positively associated with future earnings, while the other components (e.g., net unrealized gains/losses on valuation of cash flow hedge derivatives) present insignificant results. In addition, we investigate whether the reliability in OCI estimates enhances the predictive value of OCI to predict future performance. We find that the predictive ability of OCI, in particular the net unrealized gains/losses on available-for-sale (AFS) investment securities, becomes more pronounced when firms are audited by the Big 4 audit firms. Overall, our study suggests that information content embedded in OCI can provide decision-useful information that is helpful for the prediction of future firm performance.

Abstract
1. Introduction
2. Literature Review
    2.1. Institutional Background of OCI Reporting
    2.2. Hypotheses Development
3. Research Design and Sample
    3.1. Research Methodology
    3.2. Sample Selection
4. Empirical Results
    4.1. Descriptive Statistics
    4.2. OCI and Predictability of Future Earnings
    4.3. Additional Test: The Reliability of OCI Information
5. Conclusion
    5.1. Summary
    5.2. Discussion
References

• Joonil LEE(School of Management, Kyung Hee University)
• Su Jeong LEE(College of Business Administration, Inha University) Corresponding Author
• Sera CHOI(Department of Management, Korea National Open University)
• Seunghwan KIM(Department of Business Administration, Catholic University of Korea,)