The Relationships between Stock Market Returns and Firm Performance Measures in the Hospitality Industry

Conceptually, economic value added (EVA) is the performance measure most directly linked to the creation of shareholder wealth over time. Although some researchers have performed empirical research regarding EVA, the findings are contradictory. That is, the conceptual superiority of the new metrics is not always empirically supported. This study investigates the relationships between hospitality firms’ stock performances and EVA as well as other traditional firm performance measures in order to test the efficacies of firm performance measures in the hospitality industry. This study utilizes secondary data. Data on traditional performance measures and EVA/MVA were collected for the time period from year 1993 to year 2002. The sample for the current study consisted of 24 publicly traded hospitality firms for which the researchers were able to collect the necessary performance data for each year. Traditional performance measures are collected from Compustat database. Then, data was merged with the Stern Stewart Performance 1,000 database. Overall, the results revealed that traditional performance measures, specifically ROI, ROE, ROA, and EPS, had stronger relationships with hospitality firms’ stock performances than EVA.