Investors, creditors and managers always look for an on-time and reliable performance measuring index, with the goal of evaluating value creation. The aim of this study is to arrive at economic and accounting measures which would indicate the value created by the firms in Iran. After reviewing the literature, hypotheses indicating the relationship between the selected measures and value creation were formulated. Then the hypotheses were tested by analyzing the performance of 92 companies listed in the Tehran Stock Exchange (TSE) for the financial years 2004-2008. The results of the study reveal that there is a meaningful relation between accounting measures like Return on Investment (ROI) and Earnings Per Share (EPS) and shareholder value creation.

Industrial revolution changed the economic, trade and business environments. The business entities entered a new stage of increasing number of shareholders and the impossibility of direct supervision by all of them with respect to the use of resources. Later, the growth of organizations after the World War II resulted in the appointment of professional managers who run companies for salary instead of profits. In the long run, economists believed that all the stakeholders of a business firm, such as managers and shareholders, would reach a common goal. But since the 1960s, many cases of profit paradox have been observed between these groups, which indicate that managers do not always try to maximize profits for shareholders. The shareholders can adjust existing profit by payment of salaries and rewards in accordance with managers' performance after analyzing it with a proper system. But for that they need to understand the utility of their managers' strategic decisions and need to ensure that these strategic decisions build value for the company. Existence of such demands from shareholders forces managers to install new measurement frameworks in their companies, which would reflect the value and profitability of the firm in the best possible manner. For this, finding an index is necessary, by which the company's performance is logically explored to assess the performance of managers and to measure the value created for the shareholders. Several indexes like Earning Per Share (EPS), Return on Investment (ROI), and Economic Value Added (EVA) have been studied in this paper for understanding their role in the Tehran Stock Exchange (TSE) and the relationship between well-known better index and value creation for shareholders investigated. The organization of the rest of the paper is as follows. First, we explain the idea of value creation; then review the relevant literature and define the research problem and develop hypothesis. This is followed by a detailed note on methodology and then analysis and finally the conclusion.

Corporate Governance Journal, Tehran Stock Exchange, Economic Value Added, Business Firm, Strategic Decisions, Classical Economics Theory, Value Creation Process, Marketable Securities, Financial Statements, Scarce Capital Resources, Corporate Risk Management, Corporate Social Responsibility, Business Units, Business Organizations, Decision Making Process.