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Usefulness of Value Added and Abnormal Economic Economic Earnings: An Empirical Examination

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  • Ben‐Hsien Bao
  • Da‐Hsien Bao

Abstract

This paper investigates the usefulness of two alternative measures of performance: value added and abnormal economic earnings. Using earnings as the benchmark, firm value analysis, levels analysis, and changes analysis were performed to evaluate their explanatory power. Results show that value added is a statistically significant variable; its explanatory power is higher than that of earnings. Abnormal economic earnings, however, are not a significant variable.

Suggested Citation

  • Ben‐Hsien Bao & Da‐Hsien Bao, 1998. "Usefulness of Value Added and Abnormal Economic Economic Earnings: An Empirical Examination," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 25(1‐2), pages 251-264, January.
    • Handle: RePEc:bla:jbfnac:v:25:y:1998:i:1-2:p:251-264
    DOI: 10.1111/1468-5957.00186
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    Cited by:

    1. Dimitris Kyriazis & Christos Anastassis, 2007. "The Validity of the Economic Value Added Approach: an Empirical Application," European Financial Management, European Financial Management Association, vol. 13(1), pages 71-100, January.
    2. Peter Kien Pham & Jo-Ann Suchard & Jason Zein, 2011. "Corporate governance and alternative performance measures: evidence from Australian firms," Australian Journal of Management, Australian School of Business, vol. 36(3), pages 371-386, December.
    3. Hechmi Soumaya, 2013. "Eva versus Other Performance Measures," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(4), pages 532-541, April.
    4. Andrew Worthington & Tracey West, 2000. "A Review and Synthesis of the Economic Value-Added Literature," School of Economics and Finance Discussion Papers and Working Papers Series 075, School of Economics and Finance, Queensland University of Technology.
    5. Adel Elgharbawy & Magdy Abdel-Kader, 2013. "Enterprise governance and value-based management: a theoretical contingency framework," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 17(1), pages 99-129, February.
    6. Zbysław Dobrowolski & Grzegorz Drozdowski & Mirela Panait & Arkadiusz Babczuk, 2022. "Can the Economic Value Added Be Used as the Universal Financial Metric?," Sustainability, MDPI, vol. 14(5), pages 1-14, March.
    7. Bagieńska Anna, 2016. "Value Added Statement - A Relevant Instrument for Integrated Reporting," Financial Internet Quarterly (formerly e-Finanse), Sciendo, vol. 12(4), pages 92-104, December.
    8. Andrew C. Worthington & Tracey West, 2004. "Australian Evidence Concerning the Information Content of Economic Value-Added," Australian Journal of Management, Australian School of Business, vol. 29(2), pages 201-223, December.
    9. Leo Vashkor Dewri, 2022. "A Critical Assessment of Interrelationship Among Corporate Governance, Financial Performance, Refined Economic Value Added to Measure Firm Value and Return on Stock," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(4), pages 2718-2759, December.
    10. Sujata Behera, 2021. "Does EVA valuation model outperform earnings valuation model in explaining market value of equity?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 6312-6337, October.
    11. Elena Claudia Serban & Alexandru Bogeanu & Eugeniu Tudor, 2013. "Clustering Techniques In Financial Data Analysis Applications On The U.S. Financial Market," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 4, pages 176-194, August.
    12. Tracey West & Andrew Worthington, 1999. "The information content of economic value-added: A comparative analysis with earnings, cash flow and residual income," School of Economics and Finance Discussion Papers and Working Papers Series 066, School of Economics and Finance, Queensland University of Technology.

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