THE IRANIAN ACCOUNTING AND AUDITING REVIEW
Year:2004 | Volume:11 | Issue:37|Papers Count:7

Some researchers believe that the Economic Value Added (EVA) is the best measurement for firms" performance evaluation. On the other hands, Biddle" research shows that although EVA may be better than Cash From Operations (CFO), but some accounting performance evaluation mesurements as Earning Before Interest and Taxes (EBIT) may outperform EVA. This paper is aimed to determine the correlation coefficients among the Economic Value Added (EVA), Earning Before Interest and Taxes (EBIT), Cach From Operations (CFO), and Share Market Value (MY). In order to determine the correlation coefficients and test the abili~ of EVA measure and compare it to EBIT and CFO, we have implemented an empirical study in the Tehran Stock Exchange (TSE). Results of the research (at the confidence level of 95% and using 221 year-company data from the TSE) clearly show that. although EVA is more correlated to firms"share market values than CFO, but EBIT outperforms EVA. In the other words, the results completely confirm the results of Biddle"s research. It means that although EVA is a good economic measurement but it may be outperformed by some accounting measures as EBIT.

One of the purposes of financial reports is providing necessary information for interpretation of situation and evaluation of profitability of economic entities. On the other hand, investors would like to maximize their wealth. Financial statements and their associated reports are among the most important sources of information for investors in order to interpret the situation of an economic entity. Net income is also one ofthe most important accounting information items for interpretation of situation of an economic entity. However in recent years, and with considering the questions posed about the method of calculation and application of net income in evaluation of operation of economic entities, researches have been also concentrated on evaluation of interpretability of other accounting information. The purpose of this research is to investigate the effects of accounting information on future stock return. The effects of accounting information on future stock return have reasonable relations with qualitative property of relativity of information. Relativity of accounting information includes the interpretability of current situation and prediction of future situation of the economic entity. This research concludes that the following factors affect the future stock return: information related to financial leverage, accrual items, return on assets, growth of fixed assets, operating cash flows, market value, ratio of debt to equity, interest expense and dividend.

This paper investigates the relation between earning quality and off-type dividend yields in those fIrms whose dividend has either increased or decreased. Earning quality has been measured based on: earnings predictability, earnings persistence and the relation between future operating cash flows and aggregate earnings or earnings components. Having controlled our information background, investment opportunities, manners of dividend receivers and also fIrms operating risk the results show that relation between earnings quality and market reactions is not statistically signifIcant. A stock price reaction to dividend changes and unexpected earnings is positive and statistically meaningful.

Investing in company"s stock aims to maximize profits and the well-being of the investor. In order to reach this end, appropriate investment decisions must be adopted. One of the parameters and criteria used by investors in decision-making is the accounting information published by companies. Today, social accounting and reporting of companies is considered as an important approach in accounting, which can provide precious information to those who benefit form accounting information including the investors. The objective of the present research is to find out whether the social acco1!ntinginformation provided to the investors, will affect their decision making or not and if it does, how much will the extent of this effect be. The research findings show that reporting social accounting information will have between 26% to 38% effect on the decisions of investors. In other words, it can be said that social accounting information is effective in decisions of the investors, however, the degree of this effect is not important.

This paper investigates the role of accruals on cash flow and profit relations in performance measurements of accepted firms at TSE. Generally, Management has some discretion over recognition of earnings. Therefore earnings will become less reliable and "Cash flows" would be more preferable. On condition that 1) the measurement period of cash flow and profit variable is short or 2) the changes in the firm"s working capital is great, those accruals that separate accounting profits from cash flows achieve more importance. The results prove that the firm"s size has significant effect on the relation between earnings, cash flows and stock returns. However, the effect of industry type on the relation between earnings, cash flows and stock returns is yet unknown.

Nowadays, Investors, creditors, and managers need reliable and updated index to measure the stockholders" wealth. Having used these indexes,investors can decide on selling or keeping their shares, and clereditor can analyze the risk of their investment and security. In addition, managers will be able to measurethe performance of their compames. In order to evaluate the validity of this kind of indexes at Tehran"s stock exchange, this research intends to investigate the relation between "created shareholder value added" on one hand and operational cash flow, operational profitrand economic value on the other hand. Results of this research show that in those"listedcompanies at Tehran"s stock exchange, the Eva (Economicc Value Added) index is more reliable to forecast the created shareholder value. it Also shows shareholders how much role or influence has management had in their added wealth. Generally, this research shows that the traditional accounting indexes are inadequate and cannot satisfy the investment markets and shareholders requirements. EVA is an index that is more useful to assess the management in terms of maximizing shareholder"s wealth.