IDEAS home Printed from https://ideas.repec.org/a/usm/journl/aamjaf00402_21-41.html
   My bibliography  Save this article

Economic Value Added (EVA®) and Sector Returns

Author

Listed:
  • Nuttawat Visaltanachoti

    (Department of Economics and Finance, Massey University, Private Bag 102904, NSMC, Auckland, New Zealand)

  • Robin Luo

    (School of Economics and Finance, La Trobe University, Kingsbury Drive, Bundoora, Vic 3086, Australia)

  • Yi Yi

    (Department of Economics and Finance, Massey University, Private Bag 102904, NSMC, Auckland, New Zealand)

Abstract

Prior studies show that Economic Value Added (EVA®) contributes little information content beyond earnings in explaining individual stock returns. Such findings might be attributed to the idiosyncratic measurement error of EVA in an individual company. We revisit the benefits of EVA by comparing its information content in explaining 90 sector returns with the information content of three traditional accounting-based performance measures: cash flow from operations (CFO), earnings (EBIT), and residual income (RI). Our findings show that the association between traditional accounting performance measures and sector returns is higher than that with EVA. Further investigation on which components of EVA contribute most toward the association of EVA with sector returns shows that operating accruals and operating cash flows provide information content beyond that provided by components that are unique to EVA such as capital charge.

Suggested Citation

  • Nuttawat Visaltanachoti & Robin Luo & Yi Yi, 2008. "Economic Value Added (EVA®) and Sector Returns," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 4(2), pages 21-41.
    • Handle: RePEc:usm:journl:aamjaf00402_21-41
    as

    Download full text from publisher

    File URL: http://web.usm.my/journal/aamjaf/vol4-2-2008/4-2-2.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ahmed Magdy Fayed & Suchi Dubey, 2016. "An Empirical Study of Impact of EVA Momentum on the Shareholders Value Creation as Compared to Traditional Financial Performance Measures ¨C With Special Reference to the UAE," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(5), pages 23-38, May.
    2. Manju Tripathi & Smita Kashiramka & P. K. Jain, 2018. "Flexibility in Measuring Corporate Financial Performance, EVA Versus Conventional Earnings Measures: Evidences from India and China," Global Journal of Flexible Systems Management, Springer;Global Institute of Flexible Systems Management, vol. 19(2), pages 123-138, June.
    3. Prysiazhniuk Lesia, 2018. "Development of the distribution model of financial resources based on EVA indicator," Technology audit and production reserves, 4(42) 2018, Socionet;Technology audit and production reserves, vol. 4(4), pages 12-17.

    More about this item

    Keywords

    EVA®; sector; earnings; returns;
    All these keywords.

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:usm:journl:aamjaf00402_21-41. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Journal Division, Penerbit Universiti Sains Malaysia (email available below). General contact details of provider: https://edirc.repec.org/data/aammmea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.