THE ANALYSIS OF RESIDUAL INCOME – THE EMPIRICAL EVIDENCE FROM SLOVENIA

Igor Stubelj (), Mateja Jerman () and Primož Dolenc ()
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Igor Stubelj: University of Primorska, Faculty of Management Koper, Slovenia
Mateja Jerman: University of Primorska, Faculty of Management Koper, Slovenia
Primož Dolenc: University of Primorska, Faculty of Management Koper, Slovenia

JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, 2009

Abstract: In this study we were interested in the residual income of selected Slovene companies. This parameter of company’s efficiency not only looks at return on invested funds, but also implicitly compares it with risk adjusted opportunity cost of such investment. It is therefore argued that this parameter is a better performance measure than simply accounting performance measures. Our results based on selected listed companies in Slovenia showed that residual income was far from being positive, at least in year 2006. In year 2007 the situation improved when three out of ten selected companies had a negative residual income which means that companies did not create value for their shareholders and that they did not generate enough profits to cover the appropriate cost of capital, i.e. the cost of capital that take into consideration the risk adjusted opportunity cost.

Keywords: residual income; risk-adjusted cost of capital; performance measure (search for similar items in EconPapers)
JEL-codes: G19 G39 (search for similar items in EconPapers)
Date: 2009
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http://tbs.ubbcluj.ro/RePEc/bbn/journl/2009_1_1_Stubelj.pdf Revised version, 2009 (application/pdf)

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