Identify the Superior Measure Among the Traditional and Modern Measures by Establishing Relationship with Stock Market Returns – A Studyon Select Cement Companies in India

Abstract

There has been a growing concern about the performance measures based on traditional accounting information such as Return on Equity (ROE), Return on Capital Employed (ROCE), Return on Net Worth (RONW), Earning Per Shares (EPS), Net Operating Profit After Taxes (NOPAT) and Return on Investment (ROI) etc. These measures although widely used fails to capture the shareholders’ value creation/destruction as a result of management actions. The concept of EVA (Economic Value Added) and MVA (Market Value Added) has gained popularity all over the world particularly in USA, UK and European countries as companies are using modern measures (EVA and MVA) as an internal as well as external performance measure because EVA and MVA are consistent with the organizational objective of shareholder’s value creation. In the present study an analysis is made to establish relationship between Stock Market Returns (StMR) and ROA, ROCE, RONW, EPS, EVA, and MVA.