[OPE-L:8216] Profit and performance measures in main-stream theory

From: Anders Ekeland (anders.ekeland@online.no)
Date: Thu Dec 19 2002 - 14:07:45 EST


A couple of questions from a lurker:


Does anybody know a informative/critical/radical/Marxist analysis of 
performance measures like:

	a) Operating profits
	b) Return on assets (RoA), return on stock (RoS)
	c) Tobin's Q (Q) (operationalised as market value of shares to book value 
of assets)


Why are the three measures Q, RoA and RoS so weakly correlated, less than 
0.3 in Norway?

- Are book values a defunct measure of the value of a firms capital?

- The best indicator of the profit rate using accounting data is, Nominal 
Operating profit after/before taxes divided by book value of assets? Or am 
I on the wrong planet?

All references and hints are very welcome!

Context:
--------
The information is primarily to be used in a critique of main-stream 
corporate governance theory, particularly their performance measure. In the 
literature the most common measure of performance is Tobin's Q (actually 
market-to-book value), but that's basically because it gives the most 
significant results in uni/multivariate regressions and not for any deeper 
theoretical or data quality reason.

Kind regards
Anders Ekeland
Norway


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