Abstract:
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.
Machine summary:
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).
Internationally, there are many studies directed to recognize the relationship between accounting and value based financial performance measures with stock return, but most of these studies have been managed in developed countries and very little research has been conducted on EVA in Asian countries specially in Malaysia (Sharma & Kumar, 2010).
The study aimed to examine the relative and incremental information content between MVA as proxy of value based measures and accounting measures (NI, NOPAT, & EPS) with stock return on non-financial firms listed in Bursa Malaysia over the period 2002 to 2011.
Moreover, EVA is a measure of performance in a given year, while MVA is a market generated number that we calculate by subtracting the capital invested in a firm from sum of the total market value of the firm’s equity and the book value of its debt (Kramer & Peters 2001).
This research was carried out to study the relative and incremental information content between MVA and accounting performance measures (NI, NOPAT and EPS) with stock return in Bursa Malaysia.
0146 Conclusion The study aimed to investigate the relative and incremental information content of MVA with stock return compared to accounting measures, namely NI, NOPAT, and EPS in non-financial companies listed in the main market of Bursa Malaysia from 2002 to 2011.