Business Investment Strategy and Firm Performance: A Comparative Examination of Accounting and Market‐Based Measures

Abstract

This study examined the relationship between 130 firm's business investment strategy and their firm performance, as measured by return on investment (ROI) and earnngs per share (EPS). ROI was used as the accounting performance measure and EPS was used as the market‐based performance measure. Results indicate that the accounting performance measure (ROI) may be more appropriate for firms pursuing share‐increasing and turnaround business investment strategies. Whereas both accounting (ROI) and market‐based (EPS) measures may be more appropriate for firms pursuing less risky profit‐oriented business investment strategies.

Citation

Wayne Rockmore, B. and Jones, F.F. (1996), "Business Investment Strategy and Firm Performance: A Comparative Examination of Accounting and Market‐Based Measures", Managerial Finance, Vol. 22 No. 8, pp. 44-56. https://doi.org/10.1108/eb018576