Traditional Accounting Measures Research Articles

Management control systems in the knowledge economy: Assessing the role of intellectual capital in

The purpose of this paper is to show that intellectual capital (IC) efficiency as measured by the value added intellectual coefficient (VAIC) and its individual components may function as key performance indicators for use in management control and external reporting to capital market participants. We incorporate the VAIC within the Ohlson model (OM), a widely used model for equity valuation, which relates a firm's market value to the book value of equity and net earnings, and allows to include any other information that may affect the market assess-ment of firm value. We then estimate the modified OM on a panel sample of firms continuously listed on the Italian Stock exchange from 2011 to 2017 using a fixed effect (FE) specification. Empirical results indicate that IC efficiency contributes along with the traditional accounting metrics included in the OM to explain the stock market performance of sample firms. This paper suggests that the VAIC and the individual measures of IC efficiency may usefully complement traditional accounting measures of performance.

Bank funding and liquidity in an emerging market

The study examines the impact of bank funding, in two main dimensions capturing equity capital and customer deposits, on bank liquidity positions in an emerging market. Through the regression estimates following both dynamic and static approaches in panel data models and the support of typical characteristics in funding structure of Vietnamese banks from 2007 to 2017, the study has the ideal tools to find the research results as expected, based on traditional accounting measures. The results show that equity capital and customer deposits have positive effects on bank liquidity positions. Further, the state ownership factor indicates no difference between liquidity behaviours of surveyed banks. These results are validated by alternative robustness checks from both linear and nonlinear specifications. The findings clarify the debates relating to emerging economies, thus providing some implications for better disciplines.

Bank funding and liquidity in an emerging market

The study examines the impact of bank funding, in two main dimensions capturing equity capital and customer deposits, on bank liquidity positions in an emerging market. Through the regression estimates following both dynamic and static approaches in panel data models and the support of typical characteristics in funding structure of Vietnamese banks from 2007 to 2017, the study has the ideal tools to find the research results as expected, based on traditional accounting measures. The results show that equity capital and customer deposits have positive effects on bank liquidity positions. Further, the state ownership factor indicates no difference between liquidity behaviours of surveyed banks. These results are validated by alternative robustness checks from both linear and nonlinear specifications. The findings clarify the debates relating to emerging economies, thus providing some implications for better disciplines.

The Influence of Intellectual Capital on Corporate Performance of The Turkish Wholesale and Retail Trade Companies

This study aims to discuss the influence of intellectual capital on corporate performance of the Wholesale and Retail trade companies listed in Borsa Istanbul. The study utilized data collected from 26 listed companies for the period of 2010-2015. The Value Added Intellectual Coefficient (VAIC) model has been used to calculate Intellectual Capital Efficiency (ICE), while corporate performance has been measured using traditional accounting measures, such as; Market, Productivity, and Financial performance. Market performance is represented by market to book ratio (MB) and price to earnings ratio (PE), productivity performance is measured by assets turnover ratio (ATO), and financial performance is represented by return on assets (ROA), return on equity (ROE), and earning per share (EPS) ratios. Panel data regression model is utilized to find the relationship between IC and its components; Human capital Efficiency (HCE), Structural Capital Efficiency (SCE), and Capital Employed Efficiency (CEE), with company’s performance represented by Market, Productivity, and Financial performance. The findings indicated that Turkish wholesale and retail trade companies are paying good attention to the use of the VAIC components especially HCE in value creation.

Competing performance measures in predicting shareholder return of Indian pharmaceutical firms: an empirical evidence

The impetus of this paper is to examine the superiority of modern value-based measures over traditional accounting measures in predicting the shareholder return measured as the stock price appreciation and dividend paid during a period. To examine relative and incremental information content, panel data regression models were used on sample data of 77 BSE listed pharmaceutical firms during the period from 2007 to 2015. The relative information content test reveals that the EPS outperformed the modern value-based measure. And also, incremental information content test reveals that the modern value-based measures significantly predict shareholder return than accounting measures. The results suggest that the managers and investors need to consider the value-based measures in assessing the firms' performance. For evaluating the firms' ability in generating higher returns they also need to consider market conditions, capital intensity and other determinants.

The Influence Of Intellectual Capital On Corporate Performance Of The Turkish Wholesale And Retail Trade Companies

This study aims to discuss the influence of intellectual capital on corporate performance of the Wholesale and Retail trade companies listed in Borsa Istanbul. The study utilized data collected from 26 listed companies for the period of 2010-2015. The Value Added Intellectual Coefficient (VAIC) model has been used to calculate Intellectual Capital Efficiency (ICE), while corporate performance has been measured using traditional accounting measures, such as; Market, Productivity, and Financial performance. Market performance is represented by market to book ratio (MB) and price to earnings ratio (PE), productivity performance is measured by assets turnover ratio (ATO), and financial performance is represented by return on assets (ROA), return on equity (ROE), and earning per share (EPS) ratios. Panel data regression model is utilized to find the relationship between IC and its components; Human capital Efficiency (HCE), Structural Capital Efficiency (SCE), and Capital Employed Efficiency (CEE), with company’s performance represented by Market, Productivity, and Financial performance. The findings indicated that Turkish wholesale and retail trade companies are paying good attention to the use of the VAIC components especially HCE in value creation.

Shareholder Value Creation: A Review of the Theoretical and Empirical Literature

The article attempts to study in detail the significance of shareholder value creation in the companies in emerging markets and reviews the research articles and studies available in categories such as importance, empirical evidence and drivers of shareholder value creation. The purpose of this article is to give an insight into shareholder value in the first section followed by the empirical evidence and drivers of the shareholder value. For this purpose of review, the article considers various studies made on shareholder value creation published by various recognised and other recognised sources. It is observed that shareholder value creation is the most important objective in this competitive business environment to maintain the long-term relationship with the investors. The empirical evidence attempts to prove that value-based measures outperform the traditional accounting measures. The article tries to investigate the need for finding the superior measure among the shareholder value performance measures and recommends the need for reviewing the traditional performance methods.

Combining Traditional Accounting and Value-Added Activity Measures to Maximize Supply Chain Performance

Combining Traditional Accounting and Value-Added Activity Measures to Maximize Supply Chain Performance

Economic Value Added and Traditional Accounting Measures for Shareholder's Wealth Creation

This paper investigated performance measurement tools and shareholder’s wealth relationships in the context of Malaysian public listed construction companies. Conventional measures are still utilized by many Malaysian listed companies even though it has been criticized by many researchers. Both traditional accounting measures and economic measures fail to reflect a company’s true value due to the lack of long-term sustainability of a business. The study used panel data analysis techniques, particularly Error Correction Models (ECM) to test the relationship of error terms and panel Ordinary Least Square (OLS) regression to test the hypothesis. Panel data comprised of 280 observations over the period of 2003-2012 indicates that shareholder value is a function of performance measures. The results conclusively support the claims made by previous studies on the role of earnings per share, economic value added (EVA) and dividend payout ratio; and further support the potential usefulness of the performance metric for internal and external performance. Furthermore, market value added (MVA) is found to have a negative relationship with created shareholder value (CSV) contradicting with the theory that confirmed, the increase in shareholder value when there is an increase in stock market value and efficiency.

Economic Value Added and Traditional Accounting Measures for Shareholder’s Wealth Creation

This paper investigated performance measurement tools and shareholder’s wealth relationships in the context of Malaysian public listed construction companies. Conventional measures are still utilized by many Malaysian listed companies even though it has been criticized by many researchers. Both traditional accounting measures and economic measures fail to reflect a company’s true value due to the lack of long-term sustainability of a business. The study used panel data analysis techniques, particularly Error Correction Models (ECM) to test the relationship of error terms and panel Ordinary Least Square (OLS) regression to test the hypothesis. Panel data comprised of 280 observations over the period of 2003-2012 indicates that shareholder value is a function of performance measures. The results conclusively support the claims made by previous studies on the role of earnings per share, economic value added (EVA) and dividend payout ratio; and further support the potential usefulness of the performance metric for internal and external performance. Furthermore, market value added (MVA) is found to have a negative relationship with created shareholder value (CSV) contradicting with the theory that confirmed, the increase in shareholder value when there is an increase in stock market value and efficiency.

Shareholder Value Creation - Comparison of Traditional Accounting Measures and EVA as Predictors of MVA

Shareholder Value Creation - Comparison of Traditional Accounting Measures and EVA as Predictors of MVA

Management under Limited Information - The Measurement of Off-Balance Sheet Assets at Hungarian firms

Relying on three questionnaire-based surveys from 2004, 2009 and 2013, each covering around 300 top financial managers of different Hungarian manufacturing and service companies, this article analyzes how the perception and measurement of intellectual capital (IC) elements has changed. Instead of focusing on stock exchange prices or case studies of individual firms, this research is unique for using a database on the opinion of top managers over a decade. After the managers, IC has slightly gained importance giving 48-51 percent of the firm value during the years analyzed, still, most companies give little attention to measuring these items correctly. This is dangerous, as by just focusing on traditional accounting measures or relying on outdated methods, top managers are less likely to take shareholder value maximizing decisions. Encouragingly, those who measure do it better: book value has lost popularity while more appropriate market value based estimates have gained importance.

Value creation of EVA and traditional accounting measures: Indian evidence

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.

Intangibles and Value Relevance of Accounting Information : Evidence from UK Companies = الأصول غير الملموسة و ملاءمة المعلومات المحاسبية : دليل من المملكة المتحدة

Relative value relevance | Incremental value relevance | Intangible items | Traditional accounting measures | Company valuation | UK listed companies | الملاءمة النسبية | الملاءمة الإضافية | البنود غير الملموسة | المقاييس المحاسبية التقليدية | تقييم المؤسسة | المؤسسات البريطانية المدرجة في السوق المالي

MARKET VALUE ADDED AND TRADITIONAL ACCOUNTING CRITERIA: WHICH MEASURE IS A BEST PREDICTOR OF STOCK RETURN IN MALAYSIAN COMPANIES

This study tests the hypothesis that market value added (MVA) is more highly associated with stock return (SR) than traditional performance measures. The purpose of this study is to provide empirical evidence on the relative and incremental information content of MVA and traditional performance measures, namely, net income (NI), net operational profit after tax (NOPAT), and earning per shares (EPS). The sample involved 395 non-financial companies listed in the main market of Bursa Malaysia over the period 2002–2011. To analyze the hypotheses panel data regression methods were employed. The results indicated that accounting measures (NI, NOPAT and EPS) have higher relative information content with stock return compared to MVA. Thus, the results do not support the hypothesis that MVA is superior to traditional accounting measures in association with stock return. Moreover, the findings showed that MVA has incremental information content with stock return compared to accounting measures. Consequently, MVA is a useful measure in describing the firm’s stock return in Bursa Malaysia. Therefore, Malaysian companies can use MVA with traditional measures (NI, NOPAT, and EPS) in evaluating companies’ performance.

The impact of intangibles on the value relevance of accounting information: Evidence from French companies

Purpose: The paper aims to explore whether intangible items that recognised in financial statements are value-relevant to investors in the French context, and whether these items affect the value relevance of accounting information. Design/methodology/approach: Empirical data were collected from a sample of French listed companies, over the nine-year period of 2005 to 2013. Starting of Ohlson’s (1995) model, the correlation analysis and the linear multiple regressions have been applied. Findings: We find that intangibles and traditional accounting measures as a whole are value relevant. However, the amortization and impairment charges of intangibles and cash flows do not affect the market values of French companies, unlike other variables, which affect positively and substantially the market values. Also goodwill and book values are more associated with market values than intangible assets and earnings respectively. Finally, we find that intangibles have improved the value relevance of accounting information. Practical implications: French legislators must give more interest for intangibles, in order to enrich the financial statements content and increasing the pertinence of accounting information. Auditors must give more attention for intangibles’ examination process, in order to certify the amounts related to intangibles in financial statements, and hence enrich their reliability, what provides adequacy guarantees for investors to use them in decision making. Originality/value: The paper used recently available financial data, and proposed an improvement concerning the measure of incremental value relevance of intangibles items.

Is refined economic value added more associated with stock return than accounting measures? The Malaysian evidence

The paper tests the hypothesis on whether refined economic value added (REVA) is highly associated with stock return compared to traditional performance measures. The goal of the study is to provide empirical evidence on the relative and incremental information content of REVA and traditional performance measures, such as net income (NI), net operational profit after tax (NOPAT), and earning per share (EPS). The study involves 395 non-financial companies listed in Bursa Malaysia over the period of 2002–2011. Pearson correlation coefficient and panel data single and multiple regression models were employed to analyze the data. The empirical results indicate that the relative information content of the REVA was not greater than that of NI and NOPAT to explain stock returns. NI and NOPAT were highly correlated with stock return compared to REVA. Additionally, the incremental information content test indicated that REVA makes some additional contribution to information content beyond the NI, NOPAT, and EPS. Finally, the panel multiple regression models showed that there was a strong relationship between NI, NOPAT, and REVA with stock return, but there was no meaningful association between EPS and stock returns. Overall, the results do not support the hypothesis that REVA can be considered superior to traditional accounting measures in association with stock returns.

The impact of performance measures, leverage and efficiency on market value added: Evidence from Iran

The purpose of this paper is to investigate economic value added (EVA), as a performance measurement model, as compared to six traditional accounting performance measures vis-à-vis the market value of firms listed on Tehran Stock Exchange (TSE). The paper also explores the effect of the degree of operating leverage, financial leverage, and efficiency on market value added.The paper uses a sample of 450 firm-year observations from the Iranian market and applies pooled ordinary least square and panel data regression. The results indicate that EVA has no superiority over other performance measures, and that return on sales and return on assets are more powerful than EVA in explaining firm market value. Due to EVA's lack of correlation with market value, investors cannot use it as an internal value creation measure along with the traditional performance measures. This paper is one of the first studies on the relevance of traditional accounting and value-based performance measures in explaining TSE market values. The results extend EVA's role in explaining market values, and address its effect on investors’ decisions in a continental Asian market with characteristics similar to that of Iran.

Investigating the Explanatory Power of Economic Profits (Evaa) versus Accounting Profits on Stock Returns as a Measure of Shareholders Wealth Creation. An Empirical Study of the FTSE 100.

The main motivation behind this study is to find out if Economic Value Added (EVA®) is truly the best predictor of share returns and if shareholders should rely on it solely and forget accounting measures as claimed by its founders (Stern Stewart & Co.). This research investigates the superiority of Economic Profits (EVA®, EVA® spread and EVA® momentum) over traditional accounting measures (ROA, ROE, EPS, Net Income and NOPAT) in explaining stock returns and also aims to find out which is truly the best predictor of share returns. To achieve this, economic measures and accounting measures were used as the independent variables and stock returns as the dependent variable. Three different regression tests were applied: a panel data regression testing economic measures and accounting measures separately; a stepwise panel regression test and another panel regression test testing all of the independent variables along with a post-hoc chi-square analysis. These tests were applied to 25 publicly listed companies on the FTSE100 from 2009 to 2012. From both the panel data regression and the stepwise regression it was found that economic measures do not dominate earnings and it was also found that ROA has a stronger explanatory power than all of the economic measures. However, EVA® momentum was also found to have a strong positive impact on share returns, all of the other tested variables were found to be statistically insignificant. From the third test it was also found that the ROA had the highest explanatory power, followed by EVA® and EVA® momentum; the rest of the variables were also found to be statistically insignificant. Moreover, this study found that 76% of share returns are explained by different factors other than both economic and accounting measures combined. This study concludes that EVA® is not the best predictor of share returns and shareholders should not rely on it solely but should also rely on traditional accounting measures, especially the ROA. Furthermore, shareholders should also take into consideration different factors such as technical, economic and political analysis when undertaking investment decisions as share returns are not entirely explained by performance measures.

A STUDY ON SFPM ANALYSIS USING FUZZY SOFT SET

Evaluating the financial performance of a company is a turbulent work. There are lots of financial performance measures circling around the field of evaluation. It is very essential to find out a model or tool to select the best financial performance measure which should tolerate the elusiveness in the companies' decision making problem. Fuzzy Set Theory and Fuzzy Soft Theory have proved to be a successful in handling imprecise and vague knowledge that characterize this kind of problems, and it has been applied in a variety of fields in the last decades. Based on earlier literature, four important parameters, Earnings Per Share (EPS), Price Earning Ratio (P/E Ratio), Economic Value Added (EVA), Market Value Added (MVA), have been selected. The first two measures are from Traditional Accounting Measures (TAM) and the latter two measures are from Value Based Measures (VBM). Selecting a Superior Financial Performance Measure (SFPM) of a company using fuzzy soft set is the target of this paper.