Impact of financial performance indicators on stock returns: Evidence from India

Abstract

The purpose of this paper is to examine the impact of traditional (ROA, ROE, ROIC) and modern performance measures (EVA) on stock returns and investigate if there exists any relationship between the said variables in this dynamic world. The data consists of 408 companies listed in the Nifty 500 Index for the period 2002 to 2017 and further sorted to 18 sectors in India. The data relating to EVA, ROA, ROE, ROIC was obtained from Bloomberg Terminal and stock prices for the companies were extracted from CMIE Prowess database. The study implemented Panel Data Analysis (REM and FEM Model) and Correlation Analysis to get the results. Also Summary Statistics and Panel Unit Toot Tests were performed to understand the nature of the data. The results indicated a low negative relationship of EVA, ROA, ROE and ROIC with Stock Returns, with the evidence of significant relationship only in case of ROE. REM suggested that the impact of modern performance measures have been more on Stock Returns than traditional measures.