Explaining the Relationship Indices of the Performance Evaluation and Rank Performance with the Growth of the Companies

 
Vol. 6, No. 1, 2014, Ser. 66/3
 
 
Extended Abstract
 
Explaining the Relationship Indices of the Performance Evaluation and Rank Performance with the Growth of the Companies
 
M. Afshar                                          R. Zamani Amugheen
Molana Higher Education, Abyek, Qazvin
 
Introduction
       Due tocompetition in the global economy and an increase in public awareness about the financial issues and investment, investment markets have drawn our attention; on the other hand, companies often draw the attention of the investors to measure the production of goods and services with high quality and low price. A number of companies also try to present their information with an unreal and misleading picture of their status in desirable and competitive level to attract investors.  Therefore, performance evaluation of companies with different and suitable criteria and also ranking them are considered as the most important indices and favorable for investors. Performance evaluation with regard to the capital markets development is the most important subject which draws the attention of shareholders, creditors, governments and managers.  Investors are always inclined to the success level of managers in employing the knowledge in their capital. The distributed financial index is the most useful tool for performance and financial situations of the companies and in ranking considering several criteria with distinctive effects by employing models of decision making.  So, various indices are used according to the type of ranking. Therefore, in this article we summarize the amount of effects on performance evaluation of the companies and also their ranking on the growth of the companies.
 
Research Questions
       1- Does proper financial performance develop the companies?
       2- Is ranking companies based on performance evaluation indices the related factor for the distinction among companies?
 
Research Method
       The statistical community in this research includes all companies accepted in Tehran Stock Market during the period of 2006-2011. Data was collected as library method. Data related to the theoretical principles was collected from foreign and Persian articles; necessary information to test the hypotheses was obtained with reference to auditing financial statements of the companies and according to activities of the board of directors. In some cases this information was collected via “tadbirpardaz”, “Rahavardnovin” databases and the official website of Tehran Stock Exchange organization. Research method in this study is descriptive and correlative.
 
Results
       The results show that there is a meaningful relationship between indices of financial performance evaluation with their growth. Meanwhile, there is a positive and significant relationship between the overall rank of the companies due to performance evaluation indices and the growth of companies.
 
Discussion and Conclusion
       Each business unit operates within its field of work in such a way that the result of its performance can be examined, evaluated and measured in different ways.  Due to the reason that the performance evaluation has always been one of the most important issues for managers, investors, shareholders, creditors and also one of the tools to determine the financial status of the companies, it is considered as the financial ratio analysis.  In other words, variously distributed financial ratios show important realities in connection with operations and financial situation of a unit.  It should be noted that the financial performances have a significant role in the amount and the manner of growth of the companies and appropriate/inappropriate performance can also cause growth/decline in the companies. Therefore, in the present research we examined the relation of the performance evaluation indices ranking them with the growth of the companies. To do this, information related to 100 companies during financial period 2006-2011 was collected and with the use of multiple regression models, the hypotheses were tested. The results indicate that there is a significant relation between the financial ratios including asset output, rights output of the shares owners, net profit ratio to sell, assets circulation, cash flow ratio, debt ratio to assets, and long term debt ratio to the rights shares owners.  And then we ranked the companies using “Topsis” method. The results of hypothesis 2 indicate the existence of a significant relation between the meaningful ranking performance indices of financial performance and growth of companies; testing 1-2 hypothesis it was shown that the top rank of financial performance improves the companies and also testing hypothesis 2-2 shows that lower rank of financial performance decreases the growth of growth the companies.  In this way it can be said that companies increase the efficiency and effectiveness of their activities to gain high productivity and this helps to rank the companies by revising financial statements and proper financial ratios.