Investigating Content of Statements’ Information Applies to Financial Performance Evaluation of companies (Evidence from Tehran Stock Exchange)

Abstract

Purpose- This research aims to study the relationship and effect of economic value added (EVA), return on equity (ROE), retained earnings, return on assets (ROA), cash value added (CVA) and free cash flow (FCF) with stock returns. The population of the research consists of 94 companies accepted in Tehran stock exchange (TSE).

Design/methodology/approach- The data were analyzed using Eviews software and at two levels of descriptive and inferential of Pearson correlation coefficient tests and multi-variable regression analysis through step by step method. All hypotheses were confirmed except the relationship between ROA and stock return at 95 percent of confidence level.. 

Findings- The results of regression analysis indicated that the variable of EVA with -0.231 standard coefficient have the most reverse effect on stock return, the residual profit with the coefficient of 0.172 stood at second rank and free cash flows and EVA respectively with standard beta coefficient of 0.129 and 0.114 were graded third and fourth with positive effect on stock return.

Originality/value- The variable of ROA through step by step regression didn’t show meaningful effects on stock return. Then we conclude that the content of statements information significantly explain   financial companies performance.

Keywords: Information content, Tehran Stock Exchange, Financial Performance.