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Inicio Global Economics and Management Review The impact of performance measures, leverage and efficiency on market value adde...
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Vol. 20. Issue 1.
Pages 6-14 (January - June 2015)
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Vol. 20. Issue 1.
Pages 6-14 (January - June 2015)
Original
DOI: 10.1016/j.gemrev.2015.04.001
The impact of performance measures, leverage and efficiency on market value added: Evidence from Iran
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Mohammad Alipoura,
Corresponding author
, Mohammad Ebrahim Pejmanb
a Young Researchers and Elite Club, Khalkhal Branch, Islamic Azad University, Khalkhal, Iran
b Department of Accounting and Finance, Bojnourd Branch, Islamic Azad University, Bojnourd, Iran
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Tables (5)
Table 1. Definition of the research variables.
Table 2. Descriptive statistics.
Table 3. Correlation matrix.
Table 4. Test results of the relative information content of EVA, EPS, DPS, ROA, ROE, ROCE and ROS.
Table 5. Regression analysis.
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Abstract

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.

Keywords:
Market value added
Economic value added
Traditional measures of performance
Efficiency
Degree of operating and financial leverage
Emerging market
JEL classification:
G30
L25
C23

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