![]() ![]() In order to test the hypothesis, about 469 firm-year observations were collected using systematic sampling for a period of seven years. This paper investigates the effect of corporate governance components on return on assets and stock return of companies listed in Tehran stock exchange. Overall, the results do not support the hypothesis that REVA can be considered superior to traditional accounting measures in association with stock returns. ![]() 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. Additionally, the incremental information content test indicated that REVA makes some additional contribution to information content beyond the NI, NOPAT, and EPS. NI and NOPAT were highly correlated with stock return compared to REVA. 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. Pearson correlation coefficient and panel data single and multiple regression models were employed to analyze the data. The study involves 395 non-financial companies listed in Bursa Malaysia over the period of 2002-2011. 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 paper tests the hypothesis on whether refined economic value added (REVA) is highly associated with stock return compared to traditional performance measures. Second, we show that a proposition to base incentives on strictly positive EVA targets derived from an observed Market Value Added (MVA) equals the application of a REVA-type performance measure and, therefore, might be afflicted with the same deficiencies. First, we show that REVA compared to EVA might lead to underinvestment in projects with a strictly positive net present value as well as to overinvestment in projects with a strictly negative net present value even if principal and agent discount a project's income stream at the same rate. In our paper, we compare the advantages and disadvantages of these different types of residual income measurement. On the one hand, there is the traditional book value-based approach (EVA), on the other hand there are market value-based approaches, in which either only the cost of capital (REVA) or both cost of capital and the firm's operating profit before interest (residual economic income, REI) are determined by using market values. With the increasing use of residual income-based concepts of performance measurement, significantly different formulas are proposed for calculating both the firm's operating profit as well as its cost of capital. ![]()
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