Title: Competing performance measures in predicting shareholder return of Indian pharmaceutical firms: an empirical evidence

Authors: Merugu Venugopal; M. Ravindar Reddy; Bhanu Prakash Sharma G.

Addresses: School of Management, National Institute of Technology, Warangal, Telangana, 506004 India ' School of Management, National Institute of Technology, Warangal, Telangana, 506004 India ' School of Management, National Institute of Technology, Warangal, Telangana, 506004 India

Abstract: The impetus of this paper is to examine the superiority of modern value-based measures over traditional accounting measures in predicting the shareholder return measured as the stock price appreciation and dividend paid during a period. To examine relative and incremental information content, panel data regression models were used on sample data of 77 BSE listed pharmaceutical firms during the period from 2007 to 2015. The relative information content test reveals that the EPS outperformed the modern value-based measure. And also, incremental information content test reveals that the modern value-based measures significantly predict shareholder return than accounting measures. The results suggest that the managers and investors need to consider the value-based measures in assessing the firms' performance. For evaluating the firms' ability in generating higher returns they also need to consider market conditions, capital intensity and other determinants.

Keywords: performance measures; traditional accounting measures; economic value added; EVA; market value added; MVA; created shareholder value; CSV; relative information content test; incremental information content test.

DOI: 10.1504/IJBEX.2019.099554

International Journal of Business Excellence, 2019 Vol.18 No.2, pp.137 - 150

Received: 01 May 2017
Accepted: 09 Mar 2018

Published online: 06 May 2019 *

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