Overview

Original Research

THE SUPERIORITY OF MODERN ECONOMIC BASED MEASURES OVER OLD-FASHIONED ACCOUNTING MEASURES

MOHAMMAD ALADWAN 1, and AMEEN ALZUBAIDI 2.

Vol 17, No 11 ( 2022 )   |  DOI: 10.5281/zenodo.7337300   |   Author Affiliation: Associate professor, University of Jordan, Business School, Department of Accounting 1; PhD, Head of Financial and Analysis Department, Jordan Enterprise Development Corporation 2.   |   Licensing: CC 4.0   |   Pg no: 265-282   |   To cite: MOHAMMAD ALADWAN, and AMEEN ALZUBAIDI. (2022). THE SUPERIORITY OF MODERN ECONOMIC BASED MEASURES OVER OLD-FASHIONED ACCOUNTING MEASURES. 17(11), 265–282. https://doi.org/10.5281/zenodo.7337300   |   Published on: 11-11-2022

Abstract

The current investigation objects to equate the economic value added measure relative traditional measures of performance in accounting. Performance of companies was measured using traditional measures such as net income, cash flow from operations, free cash flow, and residual income and compared to the new recent generated method economic value added. A sample of listed shareholding companies were selected from Jordanian stock market for the years (2013-2019); proper analytical statistical methods like correlations, simple and multiple regression were used in order to do this comparison. The outcomes of the study assured a statistical significant association amongst market value added and economic value added; moreover, the economic value added placed in the second rank after the net income among a nine performance measures. Also, the findings revealed that the cost of capital as an element of economic value added have greater capacity to justify the volatility in market value than old-fashioned performance measures.

Keywords

Market Value Added; Net Income; Cash Flow; Residual Income; Cost of Capital