Abstract
The purpose of this study is to examine the relationship between market-based and accounting-based performances. Sample was comprised of 49 companies listed on Amman Stock Exchange (ASE) was taken. Data was collected from financial statements and official bulletins of stock market prices published between 2008 to 2016. The sectors included the Pharmaceutical & Medical Industries, Chemical Industries, Paper & Cartoon Industries, Food & Beverage, Tobacco & Cigarettes, Mining & Extraction Industries, Engineering & Construction, Electrical Industries, Textile, and Leather & Clothing. This study employed panel data analysis using fixed‐effect estimation, random‐effect estimation, and a pooled regression model. The results of this investigation demonstrated that a firm's accounting performance measures (ROA and P/E) had a significant positive relationship with the firm's market performance measure of Q ratio during the 9 years of the research as well as there was no significant relation between Q Ratio and P/E, P/B, ATO, and PM. An interesting finding further showed that the ROE measures have negatives and have a highly significant relationship with Tobin's Q ratio. Keywords: Accounting performance ratio, Tobin’s Q, Market Performance ratio. DOI : 10.7176/RJFA/10-20-04 Publication date :October 31 st 2019
Highlights
Over the last two decades, researchers have extensively discussed the use of accounting and market measures as indicators of firm financial performance in terms of whether or not these to be considered as valid indicators of firm financial performance
Ball and Brown (1968) have conducted an empirical research in order to investigate the relationship between stock prices and accounting information, in context of New York Stock Exchange
They found the significant influence of profits on stock prices. other empirical studies have been undertaken for testing this relationship between accounting financial information and its impacts on the market stock price
Summary
Over the last two decades, researchers have extensively discussed the use of accounting and market measures as indicators of firm financial performance in terms of whether or not these to be considered as valid indicators of firm financial performance. Ball and Brown (1968) have conducted an empirical research in order to investigate the relationship between stock prices and accounting information, in context of New York Stock Exchange. Ball and Brown (1968) have conducted an empirical research in order to investigate the relationship between stock prices and accounting information, in context of New York Stock Exchange. The variance in the results of these studies on the relationship between accounting information and market measures reflected the effect of using different independent variables incorporated in different models with data of one financial year. Further in this context, Dang, Tran, and Nguyen (2018) have asserted that the relevance and significant impact of financial information on stock prices has not been clearly manifested. Many authors have articulated that relationship between accounting-based and market-based performance measures, regarding how closely they are related, is still under debate within the field today. (Chakravarthy, 1986; Combs et al, 2005; Keats, 1996; Rowe and Morrow, 1999)
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