Resumen de Relative and Incremental Value Relevance of Traditional and Real Performance Measures: Evidence from Palestine Manufacturing Listed Companies

Samih Mohammad Yousef Yousef

• Purpose: This study seeks to test both incremental and relative value relevance of the Economic Value-Added (EVA) as a real performance indicator and (EPS) as a traditional performance indicator in the context of the Palestine Exchange (PEX) listed manufacturing companies.

    Theoretical framework: Previous research provided mixed evidence about the superiority of EVA over the traditional performance measures in predicting market value; some studies supported the superiority of EVA (Zimmerman, 1997; Shishanya et al., 2020), while others denied that superiority (Biddle et al., 1997; Agnatia & Amalia, 2018). Testing the value relevance of EVA compared to EPS was rarely conducted in Palestine.

    Design/methodology/approach: Seventy company-year observations were gathered from 10 of 13 manufacturing PEX-listed companies over seven years (2015-2021); the study employed regression and correlation analysis.

    Findings: The study found a significant relationship between EPS and stock returns while concluding an insignificant relationship between EVA and stock returns. The study also found that EPS beats EVA. However, the findings showed that EVA adds incremental information content to EPS’s interpretation of stock returns.

    Research, Practical & Social implications:  The study outcomes help and direct the investors and analysts, in assessing the company’s performance and predicting stock returns; it also helps policymakers and regulators in directing and updating reporting requirements.

    Originality/value: This study adds to the literature on the value relevance of real and traditional performance indices in Palestine. Further research is recommended on other sectors and the whole market.