When conducting research in corporate strategy, scholars are interested in understanding the effect of strategic actions on organizational performance, and oftentimes the firm’s financial performance becomes the ultimate dependent variable of interest. Although recent research has moved to using a holistic approach in examining the triple bottom-line effect, or a balanced score-card approach when evaluating a firm’s performance in relation to several stakeholders, considering the salience of investors as stakeholders and suppliers of capital, the predominant interest still seems to lie in financial performance. Despite this interest, scholars have not agreed upon a measure or even a set of measures that are universally accepted. If there are instantaneous or quick changes that affect a firm, it is reasonable to evaluate the anticipated effect of the change (merger, CEO turnover, or earnings) on firm value by measuring stock returns around the announcement of such a change. For example, if the acquirer's stock price falls immediately after the merger announcement, the stock market’s reaction implies that the acquisition will hurt the bidder firm’s future financial performance. However stock returns, and stock price changes are often considered “fleeting” measures of firm performance. Similarly other measures like accounting measures have also come in for criticism as “backward looking”.
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