The impact of financial Key Performance Indicators (KPIs) and Forward- Looking Disclosures (FLDs) on Market Value (MV)

Harder, Johannes Georg (2020) The impact of financial Key Performance Indicators (KPIs) and Forward- Looking Disclosures (FLDs) on Market Value (MV). DBA thesis, University of Gloucestershire. doi:10.46289/BUAC4198

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Abstract

Investors and companies require an efficient capital market where financial resources are allocated at a fair price. The challenge is not only to define measures able to calculate the fundamental value of a company but to compare it with actual market prices to test market efficiency. Based on this practical implication, the research has four objectives. Firstly, to examine the impact of changes in KPIs (key performance indicators) on changes in MV (market value). Secondly, to analyse the impact of changes in KPIs on changes in FLDs (forward-looking disclosures) as well as the impact of changes in FLDs on "one year ahead" changes in KPIs. Thirdly, to assess the impact of changes in FLDs on changes in MV. Fourthly, to evaluate the "combined" impact of changes in FLDs and KPIs on MV. Based on the philosophical belief of a realist, a quantitative research approach has been chosen using correlation and regression analysis as a method. The regression formula consists of 19 KPIs covering profitability, liquidity, test of solvency, financial structure, efficiency, cash flow and growth ratios. Concerning the evaluation of FLDs, different FLD indices established by previous research are synthesised and afterwards extended to a list of 696 words through utilising grammatical terms. To score FLDs the current research counts the number of words in total and then calculating the change score in percentage. The framework is used to test the impact of FLDs and KPIs on the MV of companies listed on one of the German stock indices DAX, SDAX, MDAX and TecDAX during the years 2007 and 2017. The analysis unveils that KPIs and FLDs, as well as KPIs and FLDs combined, are significantly related to the MV. The research implies the efficiency of the German stock market, which is beneficial for investors and companies. The thesis adds value to existing knowledge by providing a list of KPIs capable of determining the fundamental value of a company. Besides, the research implies to consider FLDs as a further essential fundamental variable that impacts MV. The thesis challenges regulatory bodies to set clear best practice guidance for not only narrative reporting but also to emphasise the requirements of distinct KPIs for evaluating the fundamental value of a company.

Item Type: Thesis (DBA)
Thesis Advisors:
Thesis AdvisorEmailURL
Aly, Doaadaly@glos.ac.ukhttps://www.glos.ac.uk/staff/profile/doaa-aly/
Hussainey, Khaledkhussainey2@glos.ac.ukUNSPECIFIED
Uncontrolled Keywords: Company valuation; Market value; Key performance indicators; Disclosures
Subjects: H Social Sciences > HG Finance > HG4001 Finance management. Business finance
H Social Sciences > HG Finance > HG4501 Investment, capital formation, speculation
Divisions: Schools and Research Institutes > Gloucestershire Business School > Law, Accounting and Finance
Depositing User: Susan Turner
Date Deposited: 06 Aug 2021 11:48
Last Modified: 06 Aug 2021 12:53
URI: http://eprints.glos.ac.uk/id/eprint/10038

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