EVA Reconsidered for the Greek Capital Market

Mandilas, Athanasios; Floropoulos, Iordanis N.; Pipiliagkopoulos, Michalis; Angelakis, George

doi:10.35808/ersj/219

Cited by 8 publications

(7 citation statements)

References 18 publications

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“…Maditinos et al (2009) find that stock returns are more closely associated with earnings per share than with EVA in the Athens Stock Exchange and that EVA adds considerable explanatory power to earnings per share. Also, Mandilas et al (2009) show that earnings per share to provide the greatest value relevance in explaining stock market returns in Athens Stock Exchange.…”

Section: Literature Reviewmentioning

confidence: 95%

The value relevance of accounting‐based performance measures in emerging economies

Ebaid

2011

Management Research Review

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PurposeThe purpose of this paper is to examine and compare the relative and incremental value‐relevance of a comprehensive set of accounting‐based measures of firm's performance in the emerging capital market of Egypt.Design/methodology/approachThe regression models are estimated using OLS to investigate the relative and incremental value relevance of accounting‐based performance measures. The relative value relevance tests are used to examine which performance measures better explain stock returns. The study also uses the incremental value relevance tests to examine whether one of these measures provides value‐relevance data beyond that provided by another.FindingsThe results of the empirical tests indicate that relative and incremental value relevance tend to increase when moving down in the income statement, with net income having the largest relative and incremental value relevance while total sales have the lowest relative and incremental value relevance. Also, all of the accrual‐based performance measures have relative and incremental value relevance statistically higher than that of operating cash flows.Research limitations/implicationsThe results highlight the importance of accounting‐based performance measures in Egypt. The results shed light on the fixation on net income that is bottom line performance measure in the income statement where net income has the highest value relevance to Egyptian capital market. However, owing to relatively small sample size, given the thinness of the Egyptian capital market, these findings should be interpreted with caution.Originality/valueThis study presents extended research on the usefulness of accounting‐based metrics as proxies for firms' performance in Egypt as one of emerging markets.

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Section: Literature Reviewmentioning

confidence: 95%

The value relevance of accounting‐based performance measures in emerging economies

Ebaid

2011

Management Research Review

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“…In the Athens Stock Exchange, Papadaki and Siougle (2007) verifies a negative price-earnings relation for those firms that report losses and a positive price-earnings relation for those firms that report profits. Also, in the Athens Stock Exchange, Mandilas et al (2009) show that earnings per share were more highly associated with stock market prices changes than economic value add (EVA); however, EVA has incremental explanatory power over earnings per share for stock returns. In Malaysia, Pirie and Smith (2008) provide evidence that the two accounting variables summarizing the income statement and the balance sheet (earnings and book value) are significant factors in the valuation process.…”

Section: Related Literature and Hypotheses Developmentmentioning

confidence: 99%

“…In emerging markets and transition economies (other than the Middle Eastern countries which are shown separately in the following paragraph), the value relevance of accounting information has not yet been extensively examined where only a small number of studies have investigated this topic (e.g. in China, Chen et al , 2001; Haw et al , 2001; in the Czech Republic, Hellström, 2006; in Greece, Papadaki and Siougle, 2007; Mandilas et al , 2009; in Malaysia, Pirie and Smith, 2008; in Romania, Filip and Raffournier, 2010). Overall, with a few inconsistencies, the empirical results suggest the value relevance of accounting information.…”

Section: Introductionmentioning

confidence: 99%

The value relevance of earnings, cash flows and book values in Egypt

Mostafa

2016

MRR

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Purpose Motivated by the lack of research on the value relevance of accounting information in the emerging markets of Middle Eastern countries, and the unique institutional and accounting setting in Egypt, this paper aims to investigate the relation between capital market and accounting information in the emerging market of Egypt. Specifically, based on Egyptian data, this study examines the value relevance of earnings, cash flows from operations and book values. Design/methodology/approach To examine the value relevance of the above accounting measures, this study uses statistical associations between accounting information and capital market values: the association between earnings and annual returns; the association between cash flows and accruals, and annual returns; and the association between earnings and book values of equity, and stock prices. Findings The results show that, first, earnings have value relevance. However, earnings changes are significantly more successful than earnings levels in explaining security returns. These results suggest that changes in earnings are largely permanent; hence, earnings follow (close to) a random walk model. Second, contrary to what is stated in the literature, cash flows from operations are not successful in explaining stock returns. This result suggests that cash flows are less important and not value relevant in Egypt compared to the USA or the UK. A possible explanation is that cash flows in Egypt are very volatile (high variance) and not persistent, so the market does not rely on them. Third, individually, both earnings and book values significantly explain stock prices; however, jointly, earnings have incremental explanatory power beyond book values for stock prices whereas book values do not. These results suggest that in Egypt the income statement is much more important than the balance sheet for valuation purposes. Overall, these results are interesting because they do not completely replicate the results from other countries. Practical implications The existence of value relevance for earnings despite the apparent lack of value relevance for cash flows can be interpreted as indicating that accruals are designed to offset and smooth cash flows’ volatility and low value relevance, so that earnings are relatively more persistent and relevant. These results show that earnings potentially are a much more important and informative measure of a firm’s value than cash flows from operations in Egypt. However, we certainly need the cash flows information as an ex-post validation of the prior earnings. Overall, it appears that the investors in Egypt are looking at the accounting data when evaluating the value of the firm, which is a good sign. However, the empirical findings of this paper are discussed. Originality/value This study contributes to the limited research on value relevance of accounting information in the emerging market of Egypt.

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“…A conclusão principal dos pesquisadores foi que o aumento do valor das empresas não dependia da existência de Responsabilidade Social, mas meramente da percepção dos investidores sobre a companhia no tocante ao tema. Mandilas et al, (2009) estudaram o poder explicativo de medidas de valor baseadas em performance (EVA) e outros três tipos de medidas contábeis tradicionais: EPS (lucro por ação); ROI (retorno sobre investimentos) e ROE (retorno sobre patrimônio líquido) com empresas do mercado atuantes na Grécia. Foram analisadas as empresas listadas na Bolsa de Valores de Atenas entre 1996 e 2005.…”

Section: Revisão De Estudos Publicadosunclassified

A Relação entre a Geração de Valor Econômico e o Valor de Mercado das Empresas Sucroalcooleiras Brasileiras <br>http://dx.doi.org/10.5007/2175-8069.2012v9n17p103

Sobue

Pimenta

2012

R. Contemp. Contab.

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Resumo Este trabalho aborda a criação de valor por empresas de capital aberto do setor sucroalcooleiro brasileiro, medida pelo EVA e pelo MVA. Foram analisados a existência e o nível de correlação entre os EVAs gerados por empresas sucroalcooleiras (São Martinho, Cosan, Cosan Limited e Guarani) e os respectivos MVAs alcançados no mercado. Os resultados obtidos revelaram uma correlação estatisticamente significativa, ao nível de 5%, apenas para a Cosan Limited. Não foram detectadas correlações significativas para três das quatro empresas analisadas. Concluímos que o EVA não é uma medida consistente para sinalizar o comportamento futuro do MVA das empresas.

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EVA Reconsidered for the Greek Capital Market

Cited by 8 publications

References 18 publications

The value relevance of accounting‐based performance measures in emerging economies

The value relevance of accounting‐based performance measures in emerging economies

The value relevance of earnings, cash flows and book values in Egypt

A Relação entre a Geração de Valor Econômico e o Valor de Mercado das Empresas Sucroalcooleiras Brasileiras <br>http://dx.doi.org/10.5007/2175-8069.2012v9n17p103

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