Please use this identifier to cite or link to this item: https://doi.org/10.48548/pubdata-1440
Full metadata record
FieldValue
Resource typeJournal Article
Title(s)Earnings less risk-free interest charge (ERIC) and stock returns: ERIC’s relative and incremental information content in a European sample
DOI10.48548/pubdata-1440
Handle20.500.14123/1509
CreatorGriskaite, Aurelija
Lueg, Rainer  0000-0002-6172-944X
AbstractThis study tests the information content of earnings less risk-free interest charge (ERIC) and analyses its ability to explain fluctuations in market-adjusted stock returns. Following Biddle et al. (1997) study design, we perform relative and incremental information content tests. Relative information content tests reveal that mandatory reporting metrics — such as earnings before extraordinary items (EBEI), cash flow from operations (CFO), and total comprehensive income (TCI) — are more highly associated with stock returns and firm values than ERIC or residual income (RI). A number of sensitivity analyses support our findings. To test incremental information content, we split ERIC into five components. Primary results indicated that components specific to ERIC — changes of net assets, after-tax interest expenses, and capital charge — do not add relative information content. Yet, sensitivity tests suggest that some ERIC components add incremental information, especially when accounting for market expectations. However, these findings are not economically substantial compared to CFO and EBEI. Overall, we conclude that mandatory metrics generally outperform ERIC and residual income. Our unique contribution lies in applying the established methodology of measuring economic value added (EVA’s) relative and incremental information content to ERIC.
LanguageEnglish
KeywordsShareholder Value; Value-based Management
Year of publication in PubData2024
Publishing typeParallel publication
Publication versionPublished version
Date issued2023-02-13
Creation contextResearch
Faculty / departmentFakultät Management und Technologie
NotesThis publication was funded by the German Research Foundation (DFG).
Date of Availability2024-11-11T08:08:03Z
Archiving Facility Medien- und Informationszentrum (Leuphana Universität Lüneburg  02w2y2t16)
Published byMedien- und Informationszentrum, Leuphana Universität Lüneburg
  Information regarding first publication
FieldValue
Resource typeJournal
Title of the resource typeCorporate Ownership & Control
IdentifierDOI: 10.22495/cocv20i2art14
Publication year2023
Volume20
Issue2
Pages166 - 181
PublisherVirtus Interpress
  Related Resources
Files in This Item:
File Description SizeFormat 

Griskaite_Earnings_less_risk-free_interest_charge_and_stock_returns.pdf
MD5: cda8abbadb8206d8dad3aa0afb5d0b78
License: 
open-access


677.02 kB

Adobe PDF
View/Open

Items in PubData are protected by copyright, with all rights reserved, unless otherwise indicated.

Citation formats
Access statistics

Page view(s): 6

Download(s): 4