The Value Relevance of Financial Metrics to Publicly Listed Firms: Evidence from Large-, Mid-, and Small-Cap Firms Listed in NYSE and NSDAQ
Financial metrics are used to evaluate the business’ activities and strategies. This study aims to determine the value relevance of financial metrics by using cross-sectional data. The sample of the study includes 300 publicly listed firms in both NYSE and NSDAQ. A correlation analysis reveals that the firm’s effectiveness is significantly related to liquidity, solvency, revenue growth, profitability and dividend metrics. The firm’s market value is significantly related to liquidity, solvency, profitability and dividends. The firm’s stock performance suggests mixed results wherein change in MPPS is influenced by liquidity, profitability, dividends and the firm’s effectiveness. A regression analysis of the firm’s effectiveness found that the financial metrics are relevant factors to the ROA however they are not relevant to the ROE. On the firm’s market value, the 12-month sales growth, 12-month EPS, and ROA are relevant to the P/S. In addition, the CR and DE are relevant to the P/B and the quarterly EPS and expected EPS are relevant to the PEG. Conversely, the financial metrics are not relevant to the P/E of the firm. On the firm’s stock performance, the financial metrics are relevant to the changes in MPPS in different periods. Primarily, the ROA is relevant to the change in MPPS in periods of 3 months, 6 months, and YTD. In a period of one (1) year, the DY and ROA are relevant to the change in MPPS. The findings empirically establish the value relevance of financial metrics and these give implication to firms and stakeholders.