At managerial level, companies use summary measures of aggregate performance, using monetary terms such as profits,
accounting returns and market returns, but none of these is perfect on its own.
2005) also propose that
accounting returns and market measures represent two distinct dimensions of firm performance.
But short-term profit measures and
accounting returns often do not do that.
The evidence of volatile performance was less complete, but there was a strong indication that CEO narcissism was associated with large annual fluctuations in
accounting returns (ROA).
It is important to note that these results are based on
accounting returns where firms can take advantage of the tax incentives, such as dividend distributions policy, principal and interest deductions on ESOP loans, provided under ERISA rules.
Letsinger noted that all syndicates currently have to file annual
accounting returns.
The purpose of this paper is to investigate the impact of bank asset composition on
accounting returns.
The pair-wise correlations in Table III suggest that firms with committee insiders have lower stock and
accounting returns, more concentrated ownership structures, and pay their CEOs a lower salary.
As a result, any inconsistency we might observe with
accounting returns would not be evident in stock returns.
Should we rely on
accounting returns - ROA, ROI, ROE, ROS, and profit margin?
During the 1980s, a CEO who increased his or her firm's market and
accounting returns by one-half standard deviation over the means in our sample would have generated compensation increases equivalent to roughly 15 percent of total compensation.
On the other hand, when companies such as those in the oil industry have been accused of abusing their market power, as evidenced by excessive accounting profitability, they tried to "explain away" high
accounting returns by claiming that these standard metrics do not adequately measure real economic returns.
