Abstract
The aim of this study was to identify variables of the accounting and value-based management (VBM) models that jointly impact shareholder returns, which could be integrated into a performance evaluation model for industrial companies listed on the Johannesburg Stock Exchange (JSE) of South Africa. The study population was the 356 JSE companies. A sample of 61 companies listed under the industrial sector and available on the IRESS platform as of 31 December 2020 was selected using the purposive sampling method. The data of the companies for this study included the VBM variables of economic value added (EVA), market value added (MVA), economic value-added momentum (EVAM) and refined economic value added (REVA). The accounting variables were return on assets (ROA), return on equity (ROE) and earnings per share (EPS). All these were the independent variables while shareholder returns represent the dependent variable. The data were processed by applying the unit root and stationarity test, the autoregressive-distributed lag (ARDL) cointegration, and vector error correction mechanism (VECM), vector autoregressive (VAR) Granger causality/block exogeneity Wald and the standard Granger causality test; the impulse response function (IRF), variance decomposition results and Wald test. The results show that EPS, ROA, EVA, and REVA jointly and positively relate to the shareholder returns. Furthermore, ROE, ROA, as well as EPS may be combined with any of EVA, EVAM, REVA or MVA for performance evaluation of the industrial companies. Thus, managers are advised to use joint accounting and VBM variables to evaluate their companies’ performance in obtaining incremental and relative performance information useful for management and investment decisions. The results of the study also serve to quell the controversy among researchers over which of the two models is superior to the other.
Key words: Accounting variables, Autoregressive-distributed lag, Granger causality, Impulse-response function, Multi-criteria model, Performance evaluation, Value-based management