Accounting and Economic Rates of Return: A Dynamic Econometric Investigation

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Published: Apr 7, 2010
DOI: https://doi.org/10.12660/rbfin.v8n1.2010.1332
Keywords:
accounting rates of return internal rate of return Granger causality panel data

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Rodrigo M Zeidan
Unigranrio
Marcelo Resende
IE/UFRJ

Abstract

Many studies have questioned empirical utilization of accounting data, as internal rates of return would be more consistent with the relevant economic concept. The paper investigates the dynamic relationships between different measures of accounting rates of return (ARRs) and an estimated internal rate of return (IRR). In contrast with the prevailing case-study investigations, we consider a panel for quoted Brazilian firms in the manufacturing industry for the 1988-3/2003-2 period. Granger causality tests are considered and the results indicate a bi-directional causality pattern when ROA (Net Profits/Total Assets) is considered as the accounting measure. This seems to indicate that there is some validity in using accounting rates of return in certain economic settings, especially when long time series are considered.

Article Details

Issue
Vol. 8 No. 1 (2010)
Section
Long Paper
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Author Biographies

Rodrigo M Zeidan, Unigranrio

Rodrigo Zeidan é Doutor em Economia pelo IE/UFRJ (2005). Atualmente é professor adjunto do Mestrado em Administração da Universidade do Grande Rio e professor horista da EBAPE/FGV. Têm experiência nas áreas de Economia Industrial e Internacional, Governança Corporativa e Finanças.

Marcelo Resende, IE/UFRJ

Marcelo Resende possui graduação em Economia pela Universidade do Estado do Rio de Janeiro (1985) , graduação em Psicologia pela Universidade do Estado do Rio de Janeiro (1990) , mestrado em Economia pela University of Pennsylvania (1993) , mestrado em Economia pela Pontifícia Universidade Católica do Rio de Janeiro (1989) , doutorado em Economia pela University of Oxford (1997) e pós-doutorado pela European University Institute (2006) . Atualmente é Professor associado II da Universidade Federal do Rio de Janeiro e Coordenador da área de Economia do Fundação de Amparo à Pesquisa do Estado do Rio de Janeiro. Tem experiência na área de Economia , com ênfase em Economia Industrial.