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Volume :11 Issue : 2 2004
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Earnings Based and Cash flow based Performance Measures & their association with stock return variations: an empirical study on Companies listed in Amman Stock Exchange
Auther : Mahmoud A. Al-Khalialeh
The purpose of this study is to examine the association between two sets of performance measures; Earning based performance measures and cash flow performance measures. In addition, the study compares the two sets of performance measures in term of their association with stock returns and in term of their explanatory power of stock returns variability. The study sample consists of 512 observations accumulated over 16 years and related to 32 companies listed in Amman Stock Exchange during the study period 1984-1999. The study provides the following findings: Earnings based performance measures & cash flow performance measures are significantly and positively correlated, Earnings based performance measures are more associated with stock returns than cash flow performance measures. Additionally, earnings based performance measures explain larger proportion of stock returns variations than cash flow performance measures, and earning based performance measures contain additional information, with respect to stock returns, beyond that contained in cash flow measures.