Title: An inter industry analysis of EVA^® versus traditional corporate financial performance measures: evidence from Indian market

Authors: Satish Kumar

Addresses: Department of Management Studies, Malaviya National Institute of Technology, Jaipur, Rajasthan, 302017, India

Abstract: The main purpose of this paper is to test the efficacy of economic value added (EVA) and traditional performance measures in Indian industries. Using data from 23 Indian industries for a period of 2000-2009, the present study applies pooled data regression to test the relative and incremental information content of EVA and other conventional financial performance measures in explaining the market value added. Regression analysis indicate that net income (NI), net operating profits after taxes (NOPAT), cash flow from operations (OCF), earnings per share (EPS) and even residual income (RI) in some industries outperform EVA in explaining the changes in MVA in majority of the industries during the study period. The results of the present study fail to support the hypothesis as EVA although exhibit significant association with MVA but underperform traditional measures in explaining the MVA in majority of the sample industries. Thus, overall results refute the claim of EVA superiority in explaining the MVA as compared to traditional measures.

Keywords: India; corporate finance; financial performance measures; economic value added; EVA; traditional performance measures; market value added; MVA; relative information content; incremental information content; India; net income; net operating profits after taxes; operations; earnings per share; residual income.

DOI: 10.1504/IJMFA.2013.058544

International Journal of Managerial and Financial Accounting, 2013 Vol.5 No.3, pp.219 - 252

Published online: 21 Oct 2014 *

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