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An empirical investigation of the relationship between TSR, value-based and accounting-based performance measures

Author

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  • Harnesh Makhija
  • Pankaj Trivedi

Abstract

Purpose - The paper aims to find out the information content of performance measures from accounting and value-based measures that best explain the total shareholder return. Design/ methodology/ approach - To achieve this aim, static and dynamic panel data regression analysis is applied to the sample of 56 Indian companies taken from the Nifty Midcap 100 Index, between 2012 and 2019. Findings - It is found that accounting-based measures have more relative information content in predicting total shareholder return as compared to value-based measures. Economic value added (EVA) and cash value added (CVA) do not add to the information content provided by accounting-based measures. A combination of accounting-based measures and value-added intellectual coefficient (VAIC) adds marginally to the information content provided by accounting-based measures in explaining the total shareholder return. Dynamic panel regression analysis shows that return on assets (ROA), return on capital employed (ROCE), return on equity (ROE) and EVA have a significant impact on total shareholder return. Originality/value - In this study, along with EVA, other measures from value-based measures, i.e. CVA are empirically tested to explain the total shareholder return. Intellectual capital efficiency computed by VAIC is also empirically tested along with accounting-based measures, EVA, CVA and market value added (MVA). To bring robustness to findings, data are tested by using dynamic panel regression analysis.

Suggested Citation

  • Harnesh Makhija & Pankaj Trivedi, 2020. "An empirical investigation of the relationship between TSR, value-based and accounting-based performance measures," International Journal of Productivity and Performance Management, Emerald Group Publishing Limited, vol. 70(5), pages 1118-1136, June.
    • Handle: RePEc:eme:ijppmp:ijppm-05-2019-0231
    DOI: 10.1108/IJPPM-05-2019-0231
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    Cited by:

    1. Harish Kumar Singla & Anand Prakash, 2021. "Financial determinants of value based performance of construction firms in India," International Journal of Productivity and Performance Management, Emerald Group Publishing Limited, vol. 72(4), pages 1025-1050, October.
    2. Ani Wilujeng Suryani & Fiki Fernando, 2024. "“Don’t Be a Bragger!”: Social Media Impression and Firm’s Financial Performance," Corporate Reputation Review, Palgrave Macmillan, vol. 27(3), pages 157-171, August.

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