Establishing the Relation Between Market-Based Performance Measure and Accounting Performance Measure

Abstract

The purpose of this study is to examine the relationship between market-based and accounting-based performances. Sample was comprised of 49 companies listed on Amman Stock Exchange (ASE) was taken. Data was collected from financial statements and official bulletins of stock market prices published between 2008 to 2016. The sectors included the Pharmaceutical & Medical Industries, Chemical Industries, Paper & Cartoon Industries, Food & Beverage, Tobacco & Cigarettes, Mining & Extraction Industries, Engineering & Construction, Electrical Industries, Textile, and Leather & Clothing. This study employed panel data analysis using fixed‐effect estimation, random‐effect estimation, and a pooled regression model. The results of this investigation demonstrated that a firm's accounting performance measures (ROA and P/E) had a significant positive relationship with the firm's market performance measure of Q ratio during the 9 years of the research as well as there was no significant relation between Q Ratio and P/E, P/B, ATO, and PM. An interesting finding further showed that the ROE measures have negatives and have a highly significant relationship with Tobin's Q ratio.

Keywords: Accounting performance ratio, Tobin’s Q, Market Performance ratio.

DOI: 10.7176/RJFA/10-20-04

Publication date:October 31^st 2019