Linkage between Economic Value Added and Market Value: An Analysis

Ashok Banerjee

37 citations0/0 files storedVikalpa The Journal for Decision Makers

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Financial Reporting and Valuation Research Corporate Finance and Governance Accounting and Organizational Management

Abstract

Maximizing shareholder value has become the new corporate paradigm. Corporations in the US have started disclosing EVA information from the beginning of 90s as a measure of corporate performance. It is believed that market value of a firm (hence shareholder wealth) would increase with the increase in EVA. Various studies done in the US also confirm this belief. EVA (a term coined and registered by Stern Stewart & Co. New York) is a residual income that subtracts the cost of capital from the operating profits generated by a business. The present study makes an at tempt to find the relevance of Stewart's claim that market value of the firm is largely driven by its EVA generating capacity in the Indian context. Based on a sample of 200 firms over a period of five years, the study shows that market value of a firm can be well predicted by estimated future EVA streams. The study has also found that market value of most of the firms in the sample is explained more by current operational value than future growth value of firms.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 37 citations exist upstream.

References

1964CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK*1961Dividend Policy, Growth, and the Valuation of Shares 1996EVA® AND MARKET VALUE 1998EVA: The Real Key to Creating Wealth 1996EVA® FOR BANKS: VALUE CREATION, RISK MANAGEMENT, AND PROFITABILITY MEASUREMENT 1996EVA & MVA as performance measures and signals for strategic change 1993THE REAL KEY TO CREATING WEALTH 1999R&D AND CAPITAL MARKETS

Cited by

2017Flexibility in Measuring Corporate Financial Performance, EVA Versus Conventional Earnings Measures: Evidences from India and China 2020Does the EVA valuation model explain the market value of equity better under changing required return than constant required return?2012Corporate Governance Mechanisms and Firm Performance: A Study of Select Indian Firms

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.