scholarly journals Value based financial performance measures: An evaluation of relative and incremental information content

2008 ◽  
Vol 6 (1) ◽  
pp. 66-77 ◽  
Author(s):  
Pierre D. Erasmus
Keyword(s):  
Financial Performance ◽  
Information Content ◽  
Performance Measures ◽  
Value Creation ◽  
Accounting Information ◽  
Relative Information ◽  
Incremental Information ◽  
Information Contents ◽  
Financial Performance Measures ◽  
Level Of Significance

Value-based (VB) financial performance measures are often advanced as improvements over traditional measures. It is argued that the inclusion of a firm‟s cost of capital in the calculation of these measures facilitates the evaluation of value creation. Furthermore they attempt to remove some accounting distortions resulting from the limitations of conventional accounting information. This paper investigates the ability of four VB measures to explain market-adjusted share returns and compare it to that of some traditional measures. Empirical results indicate that the relative information contents of the VB measures are not greater than that of earnings. The incremental information content tests indicate that their components add significantly to the information content of earnings, but that the level of significance is relatively low

Value creation of EVA and traditional accounting measures: Indian evidence

2016 ◽  
Vol 65 (4) ◽  
pp. 436-459 ◽  
Author(s):  
Vijay Kumar Gupta ◽  
Ekta Sikarwar
Keyword(s):  
Stock Returns ◽  
Information Content ◽  
Performance Measures ◽  
Value Creation ◽  
Economic Value ◽  
Value Added ◽  
Performance Measure ◽  
Content Type ◽  
Financial Measures ◽  
Incremental Information

Purpose – The purpose of this paper is to examine the superiority of economic value added (EVA) over the traditional accounting performance measures, i.e. earnings per share, return on assets and return on equity. For this purpose, the relative and incremental information content of EVA and accounting measures are tested by examining the relationship of these measures with stock returns. Design/methodology/approach – The analysis is performed for a sample of 50 Indian companies selected from the index Nifty 50 for the period of 2008-2011. The penal regression models are applied to examine the relative and incremental information content of EVA and traditional performance measures. Findings – The study finds that EVA has more relevant and incremental information content than accounting measures for analyzing shareholder value creation. These results confirm that EVA is better performance measure than traditional accounting measures. Research limitations/implications – The study could be further extended for the sample of other firms covering the specific industries and sectors. The calculation of EVA could be modified with respect to the adjustment in profit after tax and the calculation of cost of capital. Practical implications – The study has implications for the managers who are responsible to generate the wealth of shareholders by formulating the corporate financial policies. The findings also help investors who are closely concerned with the financial health of the firm while taking their investment decisions. Originality/value – The novelty of this study is that it relates total return of firm’s stock with the financial measures unlike the previous literature.

A Production Approach to Performance of Banks with Microfinance Operations

2014 ◽  
Vol 6 (2) ◽  
pp. 18-35 ◽  
Author(s):  
Emilyn Cabanda ◽  
Eleanor C. Domingo
Keyword(s):  
Data Envelopment Analysis ◽  
Financial Performance ◽  
Performance Measures ◽  
Negative Relationship ◽  
The Philippines ◽  
Productive Efficiency ◽  
Data Envelopment ◽  
Production Frontier ◽  
Financial Performance Measures ◽  
Production Approach

Banking institutions, nowadays, serve as intermediaries of funds to a variety of clients, including the micro enterprisers. This study analyzes and measures the performance of rural and thrift banks with microfinance operations in the Philippines, using combined measures of data envelopment analysis and traditional financial performance indicators. Data envelopment analysis (DEA) method is employed to measure the productive efficiency of these banks under the production approach. The variable returns to scale is also used, with the assumption that not all banks are operating at optimal scale over the long-run period. DEA findings reveal that sample banks performed below the production frontier. The average technical efficiency score of these banks is 66.09% and additional 33.91% is needed to reach the production frontier. Overall, thrift banks are found to be more productively efficient than rural banks as depository banks. The authors have also found a strong relationship between financial performance measures and bank's productive efficiency. For thrift banks, sustainability, ROE and ROA measures showed a statistically significant positive correlation to the banks' productive efficiency while a negative relationship was observed in rural banks. Lastly, the authors can suggest that both DEA's productive efficiency and financial performance measures are consistently and strongly correlated when evaluating the overall performance of banks with microfinance operations.

scholarly journals Information Content of Earnings Managements: Implications on Growth and Value Companies

2016 ◽  
Vol 2 (1) ◽  
pp. 47-56
Author(s):  
Windu Mulyasari ◽  
Slamet Sugiri ◽  
Heyvon Herdhayinta
Keyword(s):  
Earnings Management ◽  
Information Content ◽  
Market Price ◽  
Accounting Information ◽  
Future Earnings ◽  
Cycle Growth ◽  
Incremental Information ◽  
Growth Firms ◽  
Management Behaviors

Objective: The purpose of this study is to investigate the pattern of earnings management on growth and value companies in Indonesia. This study predicts that earnings management has information contents. Therefore, earnings management tends to degrade the quality of earnings, then affect the future profitability. This study analyzes the effect of earnings management information content to the company's future profitability. This study provides an understanding about accounting information at certain market price levels for growth and value companies. Findings: Findings of this study indicate the differences between earnings management influence on growth and value companies. The results also support the differences of relative incremental information content of earnings management on growth and value companies. The growth firms tend to do earnings management and have higher profitability compared to the value firms. The implication is that the incremental information content of earnings management on growth firms is lower than those of the value firms to predict future profitability.   Implication: The contribution of this research is to provide an in-depth review on earnings management study associated with company life cycle (growth and value), as well as  to give additional understanding about the existence of incremental information content of earnings management. Thus, firms show different earnings management behaviors and ultimately those behaviors affect the quality of profit to predict future earnings

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