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Is refined economic value added more associated with stock return than accounting measures? The Malaysian evidence

Author

Listed:
  • Habibollah Nakhaei

    (Islamic Azad University, Department of Accounting, Birjand, Iran)

  • Nik Intan Norhan Hamid

    (Universiti Teknologi Malaysia, Department of Accounting and Finance, Skudai, Johor, Malaysia)

  • Melati Ahmad Anuar

    (Universiti Teknologi Malaysia, Department of Accounting and Finance, Skudai, Johor, Malaysia)

  • Karim Nakhaei

    (Islamic Azad University, Department of Accounting, Birjand, Iran)

Abstract

The paper tests the hypothesis on whether refined economic value added (REVA) is highly associated with stock return compared to traditional performance measures. 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 study involves 395 non-financial companies listed in Bursa Malaysia over the period of 2002–2011. Pearson correlation coefficient and panel data single and multiple regression models were employed to analyze the data. 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. NI and NOPAT were highly correlated with stock return compared to REVA. Additionally, the incremental information content test indicated that REVA makes some additional contribution to information content beyond the NI, NOPAT, and EPS. 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. Overall, the results do not support the hypothesis that REVA can be considered superior to traditional accounting measures in association with stock returns.

Suggested Citation

  • Habibollah Nakhaei & Nik Intan Norhan Hamid & Melati Ahmad Anuar & Karim Nakhaei, 2016. "Is refined economic value added more associated with stock return than accounting measures? The Malaysian evidence," Society and Economy, Akadémiai Kiadó, Hungary, vol. 38(1), pages 69-85, March.
    • Handle: RePEc:aka:soceco:v:38:y:2016:i:1:p:69-85
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    Citations

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    Cited by:

    1. Ashita Agrawal & Pitabas Mohanty & Navindra Kumar Totala, 2019. "Does EVA Beat ROA and ROE in Explaining the Stock Returns in Indian Scenario? An Evidence Using Mixed Effects Panel Data Regression Model," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 44(2), pages 103-134, May.

    More about this item

    Keywords

    refined economic value added; net income; net operational profit after tax; earning per shares; and stock return;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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