Research Projects Completed

Research on Performance and Value Creation Measures

A Study of the Relevance of Key Performance Indicators (KPIs) to Market Participants

Researchers: Dushyant Vyas, Bingxu Fang, and Partha Mohanram, University of Toronto


Key Performance Indicators (KPIs) reported by companies have recently received significant media coverage and attention from various regulatory and standard setting bodies. This project intends to explore the large sample relevance of KPIs across various industries, and the determinants of such relevance. First, we intend to examine the contemporaneous association between disclosed non-financial Key Performance Indicators (KPI) information and stock returns. Specifically, we are interested in whether the stock market reacts to the information contained by KPI measures after controlling for traditional financial statement metrics. We next intend to examine the completeness of market adjustment to future financial implications of the reported KPIs. In other words, we will test whether stock investors overreact, underreact, or fully react to the information conveyed by KPIs when reported, and whether a long-short trading strategy based on potential market mispricing yields abnormal returns. Finally, we intend to investigate the characteristics of the reported KPIs and the reporting firms that influence the cross-sectional variability in value relevance of KPIs, such as comparability and consistency.