Relative and Incremental Information Content of Cash Recovery- based Internal Rate of Return Vs. Return On Assets in The Listed Companies in Tehran Stock Exchange

Abstract

This study examines information content of Cash Recovery- based Internal Rate of Return (CRBIRR) and Return on Assets (ROA) to determine the validity and accuracy each of the measures in Iran stock market. In order to answer this question, Tobin’s Q and stock returns are used as performance benchmarks and was tested these two measures based on CRBIRR and ROA, using the multivariate regression model. Financial information is based on a sample consisting of companies listed in TSE (540 firm/year observations) during years 2004-2009. Results indicate that CRBIRR provides better relative and incremental information content than ROA.

Keywords

• keywords: relative and incremental information content
• cash recovery rate
• rate of return on stock
• tobin’s q
• return on assets