Investigating the Relation between Tobin's Q Ratio and Earnings per Share (EPS) in Performance Evaluation of the Companies Listed in Tehran Stock Exchange

Investigating firms’ performance is a special interest for investors, creditors and other stockholders, and the results of these studies are used for decision making. In order to evaluating firm’s performance, different measures have been introduced   and been used. However, none of these measures are perfect and been criticized, and efforts have been placed to introduce new measures.
Given to the existing limitations in the accounting, economic, and market information to evaluate firm's performance, researchers have tried to use Tobin's Q, as an integrative (synthetic) data, for firm's performance evaluations.
This paper studies the usefulness of replacing EPS with Tobin’s Q by evaluating the correlation between these two. Our findings show that a positive correlation between EPS and Tobin's Q. However, this correlation is not (rp = 0.484). Our results do not suggest using only Tobin's Q in evaluating firm's performance.