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Corporate governance and earnings management and the relationship between economic value added and created shareholder value

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  • Ali El Mir
  • Souad Seboui

Abstract

The main interest in this paper is to test whether earnings management and governance mechanisms may help bridge the gap between accounting values, approximated by economic value added (EVA) and market values, approximated by created shareholder value (CSV). First, the results clearly show a non-significant relationship between EVA and CSV. Secondly, a positive correlation is identified between the difference (CSV-EVA) and discretionary accruals, proxy of earnings management. Thirdly, it is found that some governance mechanisms can attenuate the gap between CSV and EVA, whereas others can accentuate it. Finally, the results reveal that the different cases of convergence and divergence between CSV and EVA can be explained by governance mechanisms and earnings management.

Suggested Citation

  • Ali El Mir & Souad Seboui, 2006. "Corporate governance and earnings management and the relationship between economic value added and created shareholder value," Journal of Asset Management, Palgrave Macmillan, vol. 7(3), pages 242-254, September.
    • Handle: RePEc:pal:assmgt:v:7:y:2006:i:3:d:10.1057_palgrave.jam.2240216
    DOI: 10.1057/palgrave.jam.2240216
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    Citations

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    Cited by:

    1. Sliman S. Alsoboa, 2017. "The Influence of Economic Value Added and Return on Assets on Created Shareholders Value: A Comparative Study in Jordanian Public Industrial Firms," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(4), pages 63-78, April.
    2. Fiordelisi, Franco & Molyneux, Phil, 2010. "Total factor productivity and shareholder returns in banking," Omega, Elsevier, vol. 38(5), pages 241-253, October.

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