Corporate performance measures and stocks' prices returns : the case of Greece, 1992-2001
This study aims first at examining the value relevance of traditional accounting (EPS, ROI, and ROE) and value-based (SVA and EVA®) performance measures, in explaining stock returns’ variation in the Athens Stock Exchange (ASE). Pooled time-series, cross sectional data on 163 Greek companies listed in the ASE over the period 1991-2001 have been employed to examine this question. Relative information content tests revealed EPS, followed by EVA®, to be more closely associated with stock returns than ROI, ROE or SVA. However, the incremental information content tests suggested that EVA® adds more explanatory power to EPS than ROI, ROE and SVA. The significant role or ROI was also revealed. Since the performance measures under examination could not explain more than 13 percent of the variation in stock returns, the second aim of this study was to examine the perceptions and the investment strategies of market participants investing in the ASE. An empirical survey conducted from December 2003 to June 2004 asking from all user groups (official Members of the ASE, Mutual Funds Management Companies, Portfolio Investment Companies, Listed Companies, brokers, and Individual Investors) participating in the ASE to determine their investing practices. Data from 435 returned questionnaires revealed that although the professional investors follow the international practices (use fundamental analysis mostly), the individual investors and the brokers were more short-term focussed. Additionally, individual investors showed that they rely more on their instinct/experience and information from rumours and from the newspapers/media. However, this empirical research revealed the dynamic that EVA® conveys and the increasing interest of market participants in Greece. Overall, the contribution of his study comes from the fact that introduces the shareholder value added approach in the Greek capital market, and moreover, from its two unique samples, the methodology, and the revealed findings. Finally, it serves as a market paradigm both for the Greek context and for the emerging markets with the same market characteristics as Greece.