Irrelevance of Financial Indicators in Measuring Performance Romanian Companies
Irrelevance of Financial Indicators in Measuring Performance Romanian Companies
Author(s): Victoria FirescuSubject(s): National Economy, Micro-Economics, Financial Markets, Accounting - Business Administration
Published by: Fundatia Română pentru Inteligenta Afacerii
Keywords: Financial indicators; Stock exchange indicators; Correlation; Value creation;
Summary/Abstract: This paper, by means of the model of correlation coefficient between the two variables, this paper tests the intensity of the correlation between the three traditional financial indicators: the return on assets (ROA), the return on equity (ROE), the financial leverage (LF) and the indicators reflecting the change of the exchange rate (the total shareholder return-TSR and the price-to-earnings ratio -PER). The empirical research is addressed both transversely (on a sample of companies listed on the Bucharest Stock Exchange (BSE) which have as their object of activity manufacturing pharmaceuticals and longitudinally (for the 2011-2012 period) based on the positive research method. The results show that between the stock exchange indicator (TSR, PER) and the aforementioned traditional financial indicators (ROA, ROE, LF) there is a weak connection, which means that the traditional financial indicators calculated for the Romanian companies cannot anticipate the investors’ expectations on the future benefits.
Journal: SEA – Practical Application of Science
- Issue Year: II/2014
- Issue No: 04
- Page Range: 241-247
- Page Count: 7
- Language: English