International Journal of Recent Technology and Engineering (IJRTE)
ISSN: 2277-3878,Volume-8, Issue- 1C2, May 2019
610
Published By:
Blue Eyes Intelligence Engineering
& Sciences Publication
Retrieval Number: A11000581C219/19©BEIESP
ABSTRACT---The purpose of this research is to test the
support of value-based measurements about its superiority as a
measure of a company's financial performance compared with
accounting measurements. This study uses a sample of 25 mining
companies in ASEAN-5 during the period 2007-2017. The
sample selection by purposive sampling technique is top 5 mining
companies based on total assets owned and registered in the
exchanges of each ASEAN-5 nation. This study uses panel data
and applying ordinary least squares (OLS) regression to test the
relative information content and incremental information of
value-based measurements (EVA, MVA) and accounting
measurements (ROA, ROE, EPS) in explaining stock returns.
The finding is ROA and ROE outperformed EVA and MVA in
explaining stock return for mining companies in ASEAN-5,
Thailand, and Vietnam. Meanwhile, in Malaysia, Indonesia, and
Philippines value-based outperformed accounting-based
measures. The incremental information content test for mining
companies in ASEAN-5, Malaysia, and Indonesia show that
value-based measures make a marginal contribution to
information content beyond accounting measures in association
with stock return. On the contrary, value-based measures did not
have incremental content information in Thailand, Philippines,
and Vietnam.
Index Terms: ASEAN, Value-based Measurements, Economic
Value Added, Accounting-based Measures, Economic Value
Added.
I. INTRODUCTION
The ultimate goal of a company is to maximise
shareholder wealth, so it is crucial for the company to
achieve higher profits (Yahaya & Mahmood, 2011).
Shareholder’s wealth is measured based on the return they
receive on their investment (Sharma & Kumar, 2010). In
predicting the return obtained by investors, a guide was
needed (Syed & Bajwa, 2018), so the question arises of how
stock return can be explained and measured accurately
(Hall, 2016).
The answer to the best measurements that explain stock
return is more needed today because of the global
competitiveness (Dobbs et al., 2015). Accounting-based
measures give limited information because it is based on a
historical number (Sharma & Kumar, 2010). Also,
accounting-based measures add financial and accounting
Revised Manuscript Received on May15, 2019.
Arif Widodo Nugroho, Student Programe Magister Management,
State University of Jakarta, Indonesia. (arif.widodo.n@gmail.com)
Ari Warokka, Lecturer, State University of Jakarta,Indonesia.
(ari.warokka@gmail.com)
Helen Purwatiningsih, Phd Student at Educational Technology
Department, State University of Jakarta, Indonesia.
(helenpnurdin80@gmail.com)
Zainudin Hassan, Assoc Professor, Department of Educational
Foundation and Social Sciences, Universiti Teknologi Malaysia, Johor,
(Malaysia.p-zainudin@utm.my)
distortions (Shil, 2009), which is refers to deviation and
divergence between information reported by financial
statements and the reality of the business (Gandevani,
2009). So, accounting-based measures have now been
challenged and complemented by value-based measures
(Hall, 2016).
Value-based measures can eliminate financial and
accounting distortions and have a concept of value creation
which is the company's primary goal (Stewart, 1994).
Furtheremore, Stewart (1994) claims Economic Value added
(EVA) was superior to accounting-based measures in
explaining stock return. Stewart's claims supported by
several studies in explaining the company's performance
(Athanassakos, 2007; Chen & Dodd, 1997; Chmelíkova,
2008; Feltham et al., 2004; Irala, 2007; Ismail, 2011; Lee &
Kim, 2009; Reddy et al., 2011; Worthington & West, 2004).
Meanwhile in its development there are several studies
that reject Stewart’s claims (Altaf, 2016; Biddle et al., 1997;
Biddle et al., 1999; Chen & Dodd, 1997, 2001; Ismail, 2006;
Khan et al., 2016; Kim, 2006; Nakhaei, 2016; Sikarwar &
Gupta, 2016). The existence of differences in the results of
several studies is a debate between two measurements,
whether measurement based on value-added or
measurement based on accounting that best explains stock
returns?
Information related to EVA is available and promoted in a
developed market, in contrast in the emerging market there
is a minimal amount of research published(Sharma &
Kumar 2010), especially developing countries in the
ASEAN region. Kim (2006) states that most studies on EVA
are related to the manufacturing industry. Value added is a
parameter of the success of a company that can be applied in
various other industries (Kim, 2006). Previous studies of
EVA have been conducted in several industries such as
hospitality and tourism (Kim, 2006; Lee & Kim, 2009),
agribusiness (Geyser & Liebenberg, 2003), and the food
processing (Chmelíkova, 2008).
Based on a report from Flesher et al. (2018) last year, for
the next few years, it is estimated that the mining sector is
desirable for investors to get a satisfactory return. ASEAN
remains the primary objective of FDI flows among
developing countries, and one sector destination of FDI was
the mining industry (Hwee & Mirza, 2017).
Is value-based more associated with stock
return than accounting-based measures? the
asean-5 evidence
Arif Widodo Nugroho, Ari Warokka, Helen Purwatiningsih, Zainudin Hassan