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In search of the best criterion for evaluating financial performance in Iran's capital market by industry and size

Number of pages: 252 File Format: word File Code: 32212
Year: Not Specified University Degree: Master's degree Category: Librarianship
Tags/Keywords: capital - Capital market - company - Economic added value - Financial performance - Interest rate - Investment - Market added value - Performance evaluation - profitability - shareholders
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  • Summary of In search of the best criterion for evaluating financial performance in Iran's capital market by industry and size

    Dissertation to receive a master's degree

    Orientation: Accounting

    Abstract:

    Evaluating the financial performance of companies is one of the most important issues of concern to investors, creditors, governments and managers. Managers use performance evaluation to evaluate the performance of their covered areas.  Investors (shareholders) in order to evaluate the success rate of the management in using their capital and to decide on maintaining, increasing or selling the investment; Lenders in order to decide on the amount of credit granting rate; They evaluate performance. The most important aspect that is considered by investors in performance evaluation is whether value has been created for them or not. In recent years, many efforts have been made to introduce indicators that can better achieve the goals of shareholders. One of the most recent indicators was the adjusted economic added value, which takes into account the opportunity cost of all the resources used and adjusts the distortions caused by the use of different accounting methods by the management, as well as the effect of inflation, and is the only performance measure that has a direct relationship with the stock market value, and by which the added value in the stock price of any company can be explained. In this research, the explanation of the appropriate financial performance evaluation criteria has been investigated in the conditions of the Iranian capital market in the period of 2014-2016. First, the variables of the research have been identified and in order to analyze the information, from the data obtained from the new software; Excel software has been used to calculate research variables. In order to test the hypotheses, these data were analyzed by SPSS software with the help of descriptive and inferential statistics such as correlation analysis. The following results have been obtained from the research:

    First main hypothesis: There is a significant relationship between adjusted economic added value and market added value in Iran's capital market. The adjusted coefficient of determination between the two variables of adjusted economic added value and market added value in the Iranian capital market is equal to 0.266 and shows that 26.6% of the changes in market added value depend on economic added value;  sig (significance level) is less than 0.05, which indicates the existence of a moderate correlation between these two variables. Considering that in the table related to the linearity test of the model, sig is less than five percent, the assumption of linearity of the relationship between the two variables is confirmed and the first main hypothesis of the research is confirmed. The adjusted coefficient of determination between the two variables of adjusted economic added value and market added value in the Iranian capital market is equal to 0.169 and shows that 16.9% of the changes in market added value depend on economic added value; sig (significance level) is less than 0.05, which indicates the existence of a moderate correlation between these two variables. Considering that in the table related to the linearity test of the model, sig is less than five percent, the assumption of linearity of the relationship between the two variables is confirmed and the second main hypothesis of the research is confirmed.

    Third main hypothesis: main hypothesis 3: between profitability criteria for performance evaluation (such as return on equity, return on investment, growth in earnings per share, residual profit rate, sales return rate, price-to-dividend ratio) and the dividend rate of shares), with the added value of the market, there is a positive relationship in the capital market of Iran. The statistical components obtained from the statistical tests related to the variables of this hypothesis and the added value of the market show that, except for the price-to-dividend rate, other variables have a linear and positive relationship with the market value-added; as a result, the linearity of the relationship between the examined variables and the market-added value (except the price-to-dividend rate variable) is confirmed.

    Fourth main hypothesis: Adjusted economic added value compared to other financial performance evaluation criteria. In Iran's capital market, it shows more explanatory power of the added value of the market.The review of the adjusted R2 related to the relationship between MVA and other variables shows that the adjusted coefficient of determination of the adjusted economic added value has always been significantly higher than the adjusted R2 of other independent research variables. Therefore, we accept the theory that in the Iranian capital market, the REVA criterion has the most positive relationship with the added value of the market and it can be called the best criterion for evaluating financial performance. Fifth main hypothesis: type The industry influences the relationship between financial performance measures and added market value. The relevant statistical tests show that the industry control variable has an effect on the relationship between the independent and dependent variables of the research; as a result, the fifth main hypothesis is also confirmed.    The sixth main hypothesis: the size of the companies has an effect on the relationship between the financial performance measures and the added value of the market. The relevant statistical tests show that the control variable has an effect on the relationship between the independent and dependent variables of the research; as a result, the sixth main hypothesis is also confirmed. Creditors, shareholders and all capital market actors are suggested to use this criterion to evaluate the financial performance of companies and their managers and to evaluate the shares of companies using these criteria along with other criteria; in order to achieve the main goal, which is to maximize the shareholders' wealth. The results obtained in this research show a complete agreement with the results of Melbourne et al.'s research [1] (1997). According to the development and importance of the role of the capital market, it is one of the most important issues in the financial and economic field. Economic added value[3] and adjusted economic added value[4] are among the most important criteria for measuring financial performance. Several researches have been conducted at the international level and agree with the view that adjusted economic added value has the highest correlation with market values ??compared to other traditional financial performance evaluation criteria. The most important goal of this study is to theoretically explain financial performance indicators, test these indicators and provide the necessary evidence to help Iranian capital market participants to make rational decisions in the investment process. This research is of the type of applied research, and based on the method and nature, it is classified as correlational research, and by using simple and multivariate regression, it has investigated the degree of correlation between adjusted economic added value and other modern and traditional measures of financial performance with market added value [5]. The findings of the current research claim that the adjusted economic added value, compared to the economic added value and other indicators of traditional financial performance evaluation, shows a greater correlation with the added value of the market in the years 1387-1384 and it is suggested to creditors, shareholders and all capital market actors to use this criterion to evaluate the financial performance of companies and their managers and to evaluate these criteria along with other criteria; to use The results obtained in this research show a complete agreement with the results of the research of Melbourne and others[6]. Managers use performance measurement in order to evaluate the performance of parts under their coverage. Investors (shareholders) evaluate the performance in order to evaluate the success rate of management in applying their capital and making decisions for maintaining, increasing or selling investment and creditors use it to make decision about amount of rate of credit granting. The most important aspect that investors consider in evaluating performance is that whether any value has been created for them or not. In recent years, many efforts have been made to introduce indices that could better fulfill the goals of shareholders.

  • Contents & References of In search of the best criterion for evaluating financial performance in Iran's capital market by industry and size

    List:

     

    Abstract:. 1.

    Introduction:. 3

    Chapter One: General Research

    1-1-Introduction: 5

    2-1 statement of the research problem. 6

    3-1 Importance and necessity of research. 8

    4-1 research objectives. 9

    5-1 Theoretical framework. 10

    6-1 Research model: 13

    1-6-1 independent variables. 13

    1-1-6-1 Traditional performance and profitability evaluation criteria such as: 13

    2-1-6-1 New performance evaluation criteria: 15

    2-6-1 Dependent variable: 18

    3-6-1 Control variable: 18

    7-1 Research hypotheses. 19

    8-1 Definition of research words and terms: 20

    Chapter two: Review of research literature

    1-2- Introduction: 24

    2-2 performance measurement indicators (traditional and modern) 25

    1-2-2 non-financial indicators. 26

    2-2-2 Financial indicators. 28

    3-2 traditional financial criteria. 28

    1-3-2 return on investment (ROI) 28

    2-3-2 residual profit (RI) 29

    3-3-2 return on sales. 30

    5-3-2 Price per share. 31

    6-3-2 company evaluation criteria. 32

    1-6-3-2 The first criterion - profit. 32

    2-6-3-2 second criterion – profit per share. 33

    3-6-3-2 The third criterion – profit growth. 34

    4-6-3-2 The fourth criterion - investment return rate. 34

    4-2 Reasons proposed for EVA. 35

    1-4-2 value-based thinking. 36

    2-4-2 Economic added value. 37

    4-4-2 Calculation of capital return rate based on financing approach. 39

    1-4-4-2 Eliminating the effects of debts. 39

    2-4-4-2 The second stage of removing the effects of other financial deviations. 40

    3-4-4-2 The third step is to eliminate accounting deviations. 40

    4-4-4-2 types of capital equivalents and their effect on NOPAT and CAPITAL. 41

    5-4-4-2 Deferred income tax reserve. 42

    6-4-4-2 LIFO storage. 42

    7-4-4-2 Accumulated depreciation of goodwill. 43

    8-4-4-2 Unregistered goodwill. 43

    9-4-4-2 Intangible assets. 44

    10-4-4-2 Conversion of successful efforts into full costing. 44

    11-4-4-2 Other reserves of capital equivalents. 45

    5-4-2 Calculating the capital return rate from an operational point of view. 45

    6-4-2 Balance between financial approach and operational approach. 46

    7-4-2 Analysis of capital return rate. 47

    8-4-2 EVA standardization. 48

    9-4-2 EVA transformation. 50

    10-4-2 Evolution of EVA. 50

    11-4-2 The importance of EVA versus accounting profit and profit-based indicators 52

    12-4-2 EVA applications. 52

    1-12-4-2 Internal applications of EVA: 52

    2-12-4-2 External applications of EVA. 54

    13-4-2 Application of EVA as a measure of performance and service compensation. 56

    14-4-2 Economic Value Added (EVA) as evaluation techniques 57

    15-4-2 Disadvantages of EVA Economic Value Added. 58

    16-4-2 Concepts related to EVA. 59

    1-16-4-2 added value of the market. 59

    2-16-4-2 Adjusted economic added value or REVA. 60

    17-4-2 The role of EVA and MVA in the reward system. 60

    18-4-2 Advantages of using EVA together with ABC. 62

    19-4-2 Capital cost. 62

    20-4-2 Capital cost rate (C) 62

    21-4-2 Importance of capital cost rate. 63

    22-4-2 Methods of calculating the capital cost rate. 63

    23-4-2 Financing sources of companies. 64

    1-23-4-2 debt cost rate. 64

    2-23-4-2 cost rate of preferred stock ( ) 64

    3-23-4-2 cost of accumulated interest and common stock (Ke,Ks) 65

    24-4-2 methods of calculating the cost of accumulated interest. 66

    1-24-4-2 Capital asset pricing model. 66

    2-24-4-2 method of bond yield plus risk allowance. 66

    3-24-4-2 Discounted cash flow method. 67

    4-24-4-2 Use of financial mathematics. 68

    25-4-2 Cost of new common stock (Ke) 68

    26-4-2 Composition of cost of capital or weighted minagin of capital. 68

    27-4-2 Benefits of EVA. 69

    28-4-2 The right way to measure value, off-balance sheet financing 70

    29-4-2 Economic added value and three games of managers. 71

    1-29-4-2 used capital games. 71

    2-29-4-2 game of future developments. 72

    3-29-4-2 risk transfer game. 72

    30-4-2 Economic added value, economic profit and cash added value 73

    31-4-2 EVA, CVA, EP, as indicators72

    30-4-2 economic added value, economic profit and cash added value 73

    31-4-2 EVA, CVA, EP, as indicators of performance management. 73

    32-4-2 The usefulness of EVA indicators, CVA,EP, 73

    33-4-2 The results of using EVA CVA,EP, for the compensation of executives 73

    34-4-2 return on equity. 74

    35-4-2 Restrictions on the use of ROE. 76

    36-4-2 Drawbacks of the rate of return on equity ROE. 77

    37-4-2 Investment returns. 78

    38-4-2 Two punt system. 78

    5-2 Conclusion. 80

    6-2 research history. 81

    1-6-2 Foreign research. 82

    2-6-2 Research results in Iranian academic societies. 83

    Chapter 3: Research implementation method

    1-3- Introduction: 86

    2-3 Research method. 86

    3-3 study community. 87

    4-3 scope of research. 88

    1-4-3 research area. 88

    2-4-3 Time domain of research. 88

    3-4-3 Subject area of ??research. 88

    5-3 Information collection methods. 88

    6-3 information analysis method. 89

    1-6-3 Pearson correlation analysis and simple linear regression: 89

    8-3 internal and external validity of the research. 95

    Chapter Four: Analysis of Tenses

    1-4- Introduction: 98

    2-4 Descriptive indices of variables. 98

    3-4 method of testing research hypotheses. 100

    4-4 Analysis of research hypotheses. 101

    1-4-4 Checking the assumption of normality of the variables: 102

    2-4-4 The summary of the analysis by each hypothesis is described as follows: 103

    1-2-4-4 Analysis and test of the first main hypothesis: 103

    2-2-4-4 Analysis and test of the second main hypothesis. 106

    3-2-4-4 Analysis and testing of the third main hypothesis. 110

    4-2-4-4 Analysis and testing of the fourth main hypothesis. 137

    5-2-4-4 Analysis and test of the fifth main hypothesis. 141

    6-2-4-4 Analysis and test of the sixth main hypothesis. 143

    Chapter Five: Conclusions and Suggestions

    1-5-Introduction: 146

    2-5 Evaluation and explanation of hypothesis test results according to the conditions of variables 147

    1-2-5 Results of the first main hypothesis. 147

    2-2-5 Results of the second main hypothesis. 147

    3-2-5 Results of the third main hypothesis. 148

    1-3-2-5 Results of sub-hypothesis a. 148

    2-3-2-5 Results of sub-hypothesis b. 148

    3-3-2-5 Results of sub-hypothesis c. 149

    4-3-2-5 Results of sub-hypothesis d. 149

    5-3-2-5 Results of sub-hypothesis e. 150

    6-3-2-5 Sub-hypothesis results and. 150

    7-3-2-5 The results of sub-hypothesis G. 150

    4-2-5 Results of the main hypothesis four. 151

    5-2-5 Results of the fifth main hypothesis. 151

    6-2-5 The results of the sixth main hypothesis. 152

    3-5 general conclusions of the research. 152

    4-5 suggestions. 153

    1-4-5 suggestions based on the findings of research hypotheses. 154

    2-4-5 suggestions for future research. 154

    5-5 research limitations. 155

    Attachments:

    Table related to industries and names of statistical sample companies. 157

    Sources and sources:

    Persian sources: 162

    Latin sources: 165

    List of Internet sources. 168

     

    Source:

     

    1. Azar, A. and Mansour Momeni, 1385, "Statistics and its application in management", Samt Publications, second volume, ninth edition, Tehran, pp. 183-212.

    2. Izadinia, N., 2012, "Evaluation of business units using economic value added models and free cash flows (FCF) and determining the gap between price and stock value", Allameh Tabatabai University doctoral dissertation, pp. 168-206.

    3. Parsaian, 1384, "Accounting Theory", Tehran: Cultural Research Office, p. 386.

    4. Panahian, 2013, "Using economic added value in financial decision-making". Capital magazine, 3rd year, 3rd issue, p. 35.

    5. Jalili, M. and Mohammad Talebi, 1381, "Using economic added value information in evaluating the financial performance of companies admitted to the Tehran Stock Exchange". Numbers 3 and 4, pp. 158-141. 6. Jamshidi, Kh., 1381, "Statistics and its application in management", Tehran, Payam Noor University Press, p. 253.

    7. Jahankhani, A. and Ahmad Valande Fard, 2014, "Do managers and shareholders use the appropriate criteria to measure the value of the company?". Financial Research Quarterly, pp. 76-126.

    8. Jahankhani, A. and Saeed Abdullahzadeh, 1373, "Criticism on how to price shares in Tehran Stock Exchange". Financial Research Quarterly, pp. 75-94.

    9.

In search of the best criterion for evaluating financial performance in Iran's capital market by industry and size
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