Use of Equity Market Value for explaining Cash Flow Return on Investment (CFROI) and Created Shareholder Value (CSV) Evidence from Automotive Industry Tehran Stock Exchange

The concept of Value Creation is gaining momentum in Iran under the open regime. Iranian Companies are geared to understand and act upon the concept of Shareholder Value to stay competitive in this unfathomable and volatile environment. Most executives today understand that, the need to create shareholder value is paramount and the world’s most competitive management teams are responding to the pressure to create value by embracing new metrics and new models for managing their companies. This paper examined the content of information Equity Market Value for explaining Cash Flow Return on Investment (CFROI) and Created Shareholder Value (CSV) in Iran Companies by Alfred Rappaport model, a refined model based on Market Values, believed to be a superior model when compared to the traditional Metrics (ROE, ROA, ROS, EPS, CFO) and various models developed by Consulting Firms (EVA, MVA, REVA, AEVA, SVA, CVA, CFROI, CSV) to analyze Value Creation. For this purpose a sample of 21 companies representing in the automotive of industry for a period of five years from 2006-2012 have been analyzed. The Research results indicate that there is significant relationship and positive between CFROI and Equity Market Value, while there is not relationship between CSV and Equity Market Value.