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

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.

Citation

Makhija, H. and Trivedi, P. (2021), "An empirical investigation of the relationship between TSR, value-based and accounting-based performance measures", International Journal of Productivity and Performance Management, Vol. 70 No. 5, pp. 1118-1136. https://doi.org/10.1108/IJPPM-05-2019-0231