The purpose of this paper is to examine the relative and incremental information content of an earnings-based measure of performance, return on assets (ROA), vs a cash recovery-based measure of performance, the estimated internal rate of return, (EIRR), in explaining fi
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The purpose of this paper is to examine the relative and incremental information content of an earnings-based measure of performance, return on assets (ROA), vs a cash recovery-based measure of performance, the estimated internal rate of return, (EIRR), in explaining firms’ economic performance. Tobin’s Q and stock returns are used as performance benchmarks. Statistical society is the listed companies in Tehran Stock Exchange, during the years 2002-2008. The results of the empirical tests indicate that earnings-based measures of Performance, (ROA), provides more relative information content in compared to cash recovery-based measure of performance, (EIRR). Also, in explaining firms’ economic performance, earnings-based measures of performance, (ROA), provides incremental information content beyond cash recovery-based measure of performance, (EIRR).
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