Role of Value Added and Conventional Accounting Measures in Stimulating Stock Market Returns: A Study of Non-Financial Sector Listed at Pakistan Stock Exchange

Abstract

The purpose of this study is to examine the comparative relationship of value-added and conventional financial performance indicators with stock returns of listed companies of Pakistan Stock Exchange. Stock Return (SR) is used as an outcome variable, whereas, for measuring explanatory variables, Traditional Financial Performance indicators includes return on assets (ROA), return on equity (ROE), Return on Capital Employed (ROCE) and Earnings Per Share (EPS) whereas modern performance indicators is measured through economic value added (EVA), economic value added movement (EVAM), economic value added spread (EVAS). The sample consists of 107 companies and having 856 observations of non-financial sector listed on Pakistan Stock Exchange (PSX) for the time period 2011 to 2018. Findings reveal that stock returns are more influenced by the value that is created by listed companies for their shareholders than the accounting profits. The study aims at providing useful information for the management, investors, researchers, and regulators.

Keywords

• Economic added value, financial performance, stock returns, traditional measures, financial indicators.