A Literature Review of Financial Performance Measures and Value Relevance

Performance measurement comprises several metrics and applications used as a benchmark in business sectors for both internal and external users. For managers, it expresses whether company’s targets are reached and as a way of evaluating risks and returns for shareholders. A variety of performance measures are utilized to almost every operational process, and the area is rather vast. Therefore, the aim of the study is to find out what kinds of financial tools are better linked to market value. The result of the study shows that financial measures appear to be favorable measures for companies providing relevant and meaningful information to shareholders. Especially, return on investment (ROI) and earnings are significantly relevant to market value, while the superiority of EVA still remains unclear. Above all, companies still prefer traditional financial measures to other financial tools.