An investigation on relationship between residual income and internal and external performance measures

Abstract

During the past few years, there have been growing interest in learning the relationship between residual income and other financial figures such as dividend per share, market value and operating cash flow. The proposed study of this paper gathers the financial information of all listed firms traded in Tehran Stock Exchange over the period of 2007-2011. We only concentrate on listed companies whose fiscal years started from March to May of each year. The other criterion associated with the proposed study of this paper is that shares of the selected firms must have been active during period of study and there must be no change in their fiscal calendar. The study does not include the shares of holdings, banks, insurance firms. Finally, the information of the firms must be available for course of study. The study uses two regressions analysis and examines five hypotheses including the relationship between residual income and other factors including dividend per share, value added operating cash flow, value added cash flow, market cap and market value added. Using two regression models, all these hypotheses are investigated and the results of the survey confirm a meaningful relationship between residual income and dividend per share, value added operating cash flow, value added cash flow. However, the results of the second model do not confirm the last two hypotheses.

A study of the effect of change on ownership structure on enterprise value of privatized firms: Evidence from Tehran Stock Exchange

“…The results of this research showed that the independent variables investigated in this research had meaningful impacts on the research's dependent variable, which means that the impacts of company's systematic risk and markets risk on companies' stock return were positive. Daryani and Ahadi Serkani (2012), for instance, performed an investigation on relationship between residual income and internal and external performance measures for some listed firms traded in TSE over the period [2007][2008][2009][2010][2011]. The study used two regressions analysis and examined five hypotheses including the relationship between residual income and other factors including dividend per share, value added operating cash flow, value added cash flow, market cap and market value added.…”