Authors : Fabio Rizzato, Donatella Busso and Alain Devalle
Abstract: The aim of this research is to analyse the value relevance of the most common financial performance measures (Sales, EBITDA, EBIT, EBT, net income and total comprehensive income) using the value relevance methodology. The general regression model was applied according to two different approaches, each of which used with different variations in order to verify what financial performance measures can affect stock market capitalisation (and how they behave) according to the econometric model used. Specifically with the first approach we analysed data using an OLS Model with both pooled and panel datasets. In the second approach, we created models for the dataset to obtain a dynamic panel which we analysed using both the OLS and the GMM regression models. The sample consists of listed companies on the main European stock market indices (France, Germany, Italy, Spain, UK) for the period 2008-2013, totalling 175 groups analysed and 1.225 overall observations processed for each year (7.350 items overall). Results show that net income is the most value relevant financial performance measure, irrespective of the econometric model used. The issue is extremely topical, considering the IASB debate about introducing the EBIT as a mandatory sub-total in the income statement in order to satisfy user’s needs.
Fabio Rizzato, Donatella Busso and Alain Devalle, 2019. Value Relevance of Financial Performance Measures under IFRS: An Analysis of Eurpean Listed Companies. International Business Management, 13: 101-118.