The effect of classification shifting on the market value of industrial companies

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Abstract

This study aimed to investigate the impact of classification shifting (CS) practices in financial statements, specifically income classification shifting (ICS), operating cash flow classification shifting (CFCS), and balance sheet classification shifting (BSCS), on the market value of Jordanian industrial companies. Employing a descriptive-analytical approach, the study analyzed the financial statements of a sample of 30 industrial companies listed on the Amman Stock Exchange over the period 2018–2023. The results of a multiple linear regression analysis revealed that CS practices do indeed influence the market value of these companies. These results are consistent with prior evidence suggesting that managers strategically use income statement presentation to influence investor perceptions without altering firm fundamentals (McVay, 2006; Anagnostopoulou & Malikov, 2023). Notably, significant effects were observed in both ICS and BSCS, whereas operating CFCS showed no significant impact. Based on these findings, the study recommends that Jordanian industrial companies adopt a standardized framework for financial statement classification. Such a framework would enhance comparability across firms, reduce opportunities for accounting manipulation, and ultimately improve market efficiency and the reliability of stock valuations.

Keywords: Classification Shifting, Income Classification Shifting, Cash Flow Classification Shifting (CFCS), Balance Sheet Classification Shifting, Market Value, Industrial Companies

Authors’ individual contribution: The Author is responsible for all the contributions to the paper according to CRediT (Contributor Roles Taxonomy) standards.

Declaration of conflicting interests: The Author declares that there is no conflict of interest.

JEL Classification: G14, G32, M41

Received: 26.06.2025
Revised: 07.09.2025; 05.10.2025; 16.01.2026
Accepted: 27.01.2026
Published online: 30.01.2026

How to cite this paper: Alduneibat, K. A. (2026). The effect of classification shifting on the market value of industrial companies. Corporate and Business Strategy Review, 7(1), 226–238. https://doi.org/10.22495/cbsrv7i1art20