Do Efficiency Ratios Help Investors to Explore Firm Performances? Evidence from Italian Listed Firms

This paper examines how proxies of efficiency can help investors in exploring firm profitability, stock market value and operational cash flow using company accounting information on the basis of the multiple regression model. On a sample of 215 non-financial firms listed on the Italian Stock Exchange between 2004 and 2013, a positive correlation was found between several turnover ratios used as proxies of efficiency and measures of firm profitability that are more closely related to operating activities such as EBITDA to assets ratio. Similarly, a positive correlation was revealed when operational cash flow was examined, whilst no significant associations between proxies of efficiency and stock market indicators were found. Furthermore, this study explored the role that turnover ratios used as proxies of efficiency have on capital structure in order to gain insight into the significance of relationships related to cash flow