Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Modelling traditional accounting and modern value‐based performance measures to explain stock market returns in the Athens Stock Exchange (ASE)

Modelling traditional accounting and modern value‐based performance measures to explain stock... Purpose – The purpose of this paper is to investigate the explanatory power of two value‐based performance measurement models, Economic Value Added (EVA ® ) and shareholder value added (SVA), compared with three traditional accounting performance measures: earnings per share (EPS), return on investment (ROI), and return on equity (ROE), in explaining stock market returns in the Athens Stock Exchange (ASE). Design/methodology/approach – The paper uses the Easton and Harris formal valuation model and employs both a relative and an incremental information content approach to examine which performance measure best explains stock market returns; and the explanatory power of the pairwise combinations of one value‐based performance measurement model and one traditional accounting performance measure in explaining stock market returns. For this purpose, pooled time‐series, cross‐sectional data of listed companies in the Athens Stock Exchange (ASE) over the period 1992‐2001 have been collected and modelled. Findings – Relative information content tests reveal that stock market returns are more closely associated with EPS than with EVA ® or other performance measures. However, incremental information content tests suggest that the pairwise combination of EVA ® with EPS increases significantly the explanatory power in explaining stock market returns. Practical implications – The results suggest that the market participants in the Greek stock market should pay additional attention to EVA ® but they should also consider other determinants to develop their investment strategies. Originality/value – The paper is one of the first studies on the value relevance of traditional accounting (EPS, ROI, and ROE) and value‐based (EVA ® and SVA) performance measures in explaining stock market returns in the ASE. The results extend the understanding of the role of EVA ® and SVA in explaining stock market returns in the ASE, and, moreover, whether they may affect investors' decisions in a continental European market with market characteristics similar to that of Greece. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Modelling in Management Emerald Publishing

Modelling traditional accounting and modern value‐based performance measures to explain stock market returns in the Athens Stock Exchange (ASE)

Loading next page...
 
/lp/emerald-publishing/modelling-traditional-accounting-and-modern-value-based-performance-LgZvFGJG2V

References (55)

Publisher
Emerald Publishing
Copyright
Copyright © 2009 Emerald Group Publishing Limited. All rights reserved.
ISSN
1746-5664
DOI
10.1108/17465660911006431
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to investigate the explanatory power of two value‐based performance measurement models, Economic Value Added (EVA ® ) and shareholder value added (SVA), compared with three traditional accounting performance measures: earnings per share (EPS), return on investment (ROI), and return on equity (ROE), in explaining stock market returns in the Athens Stock Exchange (ASE). Design/methodology/approach – The paper uses the Easton and Harris formal valuation model and employs both a relative and an incremental information content approach to examine which performance measure best explains stock market returns; and the explanatory power of the pairwise combinations of one value‐based performance measurement model and one traditional accounting performance measure in explaining stock market returns. For this purpose, pooled time‐series, cross‐sectional data of listed companies in the Athens Stock Exchange (ASE) over the period 1992‐2001 have been collected and modelled. Findings – Relative information content tests reveal that stock market returns are more closely associated with EPS than with EVA ® or other performance measures. However, incremental information content tests suggest that the pairwise combination of EVA ® with EPS increases significantly the explanatory power in explaining stock market returns. Practical implications – The results suggest that the market participants in the Greek stock market should pay additional attention to EVA ® but they should also consider other determinants to develop their investment strategies. Originality/value – The paper is one of the first studies on the value relevance of traditional accounting (EPS, ROI, and ROE) and value‐based (EVA ® and SVA) performance measures in explaining stock market returns in the ASE. The results extend the understanding of the role of EVA ® and SVA in explaining stock market returns in the ASE, and, moreover, whether they may affect investors' decisions in a continental European market with market characteristics similar to that of Greece.

Journal

Journal of Modelling in ManagementEmerald Publishing

Published: Jan 1, 2009

Keywords: Value analysis; Economic performance; Shareholder value analysis; Accounting standards; Earnings per share; Greece

There are no references for this article.