Social construction of linking executive compensation to EVA: a study on Indian corporates

2019 ◽  
Vol 11 (3) ◽  
pp. 202-219 ◽  
Author(s):  
Manju Tripathi ◽  
Smita Kashiramka ◽  
P.K. Jain
Keyword(s):  
Financial Performance ◽  
Executive Compensation ◽  
Performance Management ◽  
Economic Value ◽  
Value Added ◽  
Performance Measure ◽  
Goal Congruence ◽  
Content Type ◽  
Performance Benchmarks ◽  
The Right

Purpose “Paying for performance” has been the corporate mantra for ages, but finding the right performance benchmarks continues to be an enigma. Equally significant is the ongoing debate on the superiority of economic value added (EVA) aligned executive incentive plans over traditional financial performance benchmarks to ensure optimal goal congruence between the corporate and the executive performances. Consequently, this paper aims to explore a plausible linkage between executive compensation and EVA for Indian corporates from a social constructivist perspective. Design/methodology/approach The study uses a mixed method approach where the quantitative analysis of responses from the survey of senior personnel/finance executives of Indian firms is complemented by the qualitative analysis of personal interviews to provide contextual depth to the quantitative data. Findings Based on the study, the researchers construct an understanding that EVA is a superior concept but has restricted utility primarily owing to its computational complexity and unaudited characteristics. The researchers’ interpretive inference finds mandatory disclosure of an audited EVA figure in the corporate financial statements as a prime requirement for EVA to emerge as an objective and visible performance measure. Practical implications Attention of policymakers is sought towards standardising its computation and ensuring its disclosure to bring it at par with the conventional executive financial performance benchmarks. Originality/value The narrative on benefits and the challenges of adopting EVA aligned performance management system is provided directly by the top-level executives responsible for designing the “paying for performance” policies.

scholarly journals Economic value added: A financial flexibility tool

2014 ◽  
Vol 12 (1) ◽  
pp. 703-708 ◽  
Author(s):  
Reeta Shah ◽  
Arunima Haldar ◽  
S.V.D. Nageswara Rao
Keyword(s):  
Financial Performance ◽  
Shareholder Value ◽  
Economic Value ◽  
Value Added ◽  
Performance Measure ◽  
Corporate Financial Performance ◽  
Economic Value Added ◽  
Financial Flexibility ◽  
The Right ◽  
The Impact

With increased emphasis on shareholder value addition, there has been an ongoing debate on choosing the right measure of corporate financial performance. There is need for a single measure of financial performance that not only measures corporate financial performance but also works as a financial flexibility tool. The financial performance measure employed by the firm measures the value generated by the firm. This necessitates the firms to choose the right performance tool which can reflect the accurate value added by the firm. We study the role and implications of Economic Value Added as a financial performance measure and further discuss its applicability as a tool for introducing financial flexibility. Flexibility is assessed by measuring the impact of organization’s competitiveness and performance. The findings reveal that EVA as a tool enables the corporate to differentiate between value-creating and value-destructing activities and helps managers in taking right decisions which enhances shareholder value. Thus, finally the research makes a case for managers to use EVA as a tool to provide additional information to investors. Interestingly, EVA can also be adapted as a corporate philosophy for motivating and educating employees

Value creation of EVA and traditional accounting measures: Indian evidence

2016 ◽  
Vol 65 (4) ◽  
pp. 436-459 ◽  
Author(s):  
Vijay Kumar Gupta ◽  
Ekta Sikarwar
Keyword(s):  
Stock Returns ◽  
Information Content ◽  
Performance Measures ◽  
Value Creation ◽  
Economic Value ◽  
Value Added ◽  
Performance Measure ◽  
Content Type ◽  
Financial Measures ◽  
Incremental Information

Purpose – The purpose of this paper is to examine the superiority of economic value added (EVA) over the traditional accounting performance measures, i.e. earnings per share, return on assets and return on equity. For this purpose, the relative and incremental information content of EVA and accounting measures are tested by examining the relationship of these measures with stock returns. Design/methodology/approach – The analysis is performed for a sample of 50 Indian companies selected from the index Nifty 50 for the period of 2008-2011. The penal regression models are applied to examine the relative and incremental information content of EVA and traditional performance measures. Findings – The study finds that EVA has more relevant and incremental information content than accounting measures for analyzing shareholder value creation. These results confirm that EVA is better performance measure than traditional accounting measures. Research limitations/implications – The study could be further extended for the sample of other firms covering the specific industries and sectors. The calculation of EVA could be modified with respect to the adjustment in profit after tax and the calculation of cost of capital. Practical implications – The study has implications for the managers who are responsible to generate the wealth of shareholders by formulating the corporate financial policies. The findings also help investors who are closely concerned with the financial health of the firm while taking their investment decisions. Originality/value – The novelty of this study is that it relates total return of firm’s stock with the financial measures unlike the previous literature.

Impact of intellectual capital on financial performance: evidence from the Bangladeshi textile sector

2018 ◽  
Vol 14 (4) ◽  
pp. 429-454 ◽  
Author(s):  
Leena Afroz Mostofa Chowdhury ◽  
Tarek Rana ◽  
Mahmuda Akter ◽  
Mahfuzul Hoque
Keyword(s):  
Financial Performance ◽  
Performance Management ◽  
Emerging Economies ◽  
Intellectual Capital ◽  
Textile Industry ◽  
Value Added ◽  
Annual Reports ◽  
Future Research ◽  
Content Type ◽  
The Impact

Purpose The purpose of this paper is to investigate the influence of intellectual capital (IC) on financial performance and, in turn, to provide insights into its impact on emerging economies. Design/methodology/approach Data were collected from 34 textile firms in Bangladesh between 2013 and 2017. The IC efficiency, through value-added intellectual coefficient (VAIC) model, and its impact on financial performance, through return on assets (ROA), return on equity and asset turnover (ATO), was examined using descriptive statistics and multiple regression techniques. The analysis is based on secondary data obtained from annual reports. Findings The results indicate the impact of VAIC components on financial performance and also demonstrate diverse relationships with changes in financial indicators. The VAIC components significantly influenced productivity outcomes, with tangible capital playing a major role in both productivity and profitability. Moreover, it was found that structural capital had a considerable effect on ATO and ROA with human capital indicating an insignificant impact on all financial performance indicators. Research limitations/implications The research outcome is specific to the textile industry in emerging economies. The study may guide future research on IC performance in textile firms and cross-industry comparisons. Practical implications Managers, firm owners and regulators need to align IC to performance management to sustain the competitive advantage in globalised competitive settings. Originality/value The study provides an empirical evidence and extends knowledge of IC utilisation for enhancing the financial performance of the textile firms in emerging economies.

Performance measurement and metrics in supply chains: an exploratory study

2015 ◽  
Vol 64 (8) ◽  
pp. 1068-1091 ◽  
Author(s):  
Wojciech Piotrowicz ◽  
Richard Cuthbertson
Keyword(s):  
Performance Management ◽  
Customer Service ◽  
Balanced Scorecard ◽  
Economic Value ◽  
Empirical Work ◽  
Health And Safety ◽  
Value Added ◽  
Small Sample ◽  
Content Type ◽  
The Balanced Scorecard

Purpose – The purpose of this paper is to explore the approaches and metrics used to measure supply chain (SC) performance, and to understand the relative perceived importance of such measures. Design/methodology/approach – This research is based on empirical data captured through a survey of SC professionals in a variety of business sectors. Findings – The research confirms the importance of the balanced scorecard (BSC) approach, with BSC, SCOR and economic value added being the most commonly used tools. Economic metrics dominate, focused on cost and customer service. While social and environmental-related measures are of emerging importance, they appear to be of similar importance to economic metrics only when backed up by a legal obligation. Research limitations/implications – The small sample of 51 companies was based on access and the group is not wholly representative of all businesses. Respondents were mainly managers from EU countries involved in procurement, logistics and transport activities. Surveyed companies included manufacturing, automotive, retail, logistics services and wholesaling businesses. Practical implications – The common key performance indicators (KPI’s) are identified. These include measures related to: quality, efficiency, responsiveness, health and safety, employees, emission, natural resources utilisation, waste and recycling. Issues that influence the usage of measurement systems as well as the company and SC levels are ranked. Social implications – Implementation of a monitoring system and subsequent usage of the collected data may help to reduce negative external impacts on society and the environment. Originality/value – The field of SC performance management is still developing, with growing empirical work. Nevertheless this paper is one of the first attempts to carry out such an analysis focused on metrics and their usage. The survey instrument has been tested and can now be applied to other contexts.

scholarly journals The impact of economic value added (EVA) and return on assets on created shareholder value of Vietnamese firms

2020 ◽  
Vol 3 (4) ◽  
pp. 402-417
Author(s):  
Tran Thi Thuy Linh
Keyword(s):  
Regression Model ◽  
Financial Performance ◽  
Robust Regression ◽  
Economic Value ◽  
Value Added ◽  
Performance Measure ◽  
Investment Efficiency ◽  
Economic Value Added ◽  
Return On Assets ◽  
The Impact

The financial performance of an enterprise affects the valuation of assets to its shareholders. Maximizing the value of assets for shareholders is an important goal of corporate financial management, so shareholders always expect share value increases to achieve optimal investment efficiency. The objective of the study is to analyze the impact of Economic Value Added (EVA) and Return on Assets (ROA) on Created Shareholders Value (CSV) in Vietnamese listed companies during 2011-2016. Whether EVA measure better than the traditional performance measure like ROA on CSV? The CSV indicator is measured by two models: the Fernandez model (2001) and the Market Value Added (MVA) model. The regression methods were being used are the OLS regression model and the Robust regression model. The research results show that EVA has a positive impact on CSV in most years in the period of 2011-2016. In addition, EVA is more effective than ROA in explaining the changes in CSV in most years during the research period, showing the outstanding advantage of EVA in evaluating CSV over ROA. This study encourages companies to use a combination of different measurement methods to valuate shareholder assets and financial performance.

Financial performance measurement of supply chains: a review

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Masoud Rahiminezhad Galankashi ◽  
Farimah Mokhatab Rafiei
Keyword(s):  
Supply Chain ◽  
Performance Measurement ◽  
Financial Performance ◽  
Supply Chains ◽  
Economic Value ◽  
Value Added ◽  
Assessment Process ◽  
Publication Date ◽  
Content Type ◽  
Financial Performance Measures

PurposeThis study provides a systematic review on performance measurement of supply chains from a financial perspective.Design/methodology/approachThis study systematically reviews the financial performance measures of supply chains. More specifically, this research reviews a total of 100 papers published in more than 50 peer-reviewed journals. The reviewed papers are categorized into three major areas of engineering, business and management. Additionally, the papers are investigated based on country, journal frequency, applied methods, publication date and research type (application or developmental).FindingsAccording to the obtained results, cost, return on assets (ROA), sales, asset turnover, return on investment (ROI), market share, inventory turnover, profit margin, revenue growth, economic value added (EVA) and cash-to-cash cycle are the most common metrics of financial performance measurement. Next, a framework is developed based on different categories of performance measurement and decision levels of the supply chain. Finally, some research directions are suggested to be further investigated by other scholars.Originality/valueAlthough available studies on supply chain performance measurement are very vast and comprehensive, the majority of the studies have neglected to highlight the importance of financial measures. In other words, with the advent of nonfinancial measures, however, the majority of supply chain managers still prefer to consider financial issues in their performance assessment process.

scholarly journals The Assessment of Financial Performance of the Lithuanian Dairy Sector’s Listed Companies

2020 ◽  
Vol 83 (1) ◽  
pp. 73-92
Author(s):  
Asta Kamandulienė ◽  
Žilvinas Kulbokas
Keyword(s):  
Financial Performance ◽  
Positive Impact ◽  
Labour Productivity ◽  
Economic Value ◽  
Value Added ◽  
Performance Measure ◽  
Cost Of Debt ◽  
Gross Margin ◽  
Independent Variables ◽  
Opposite Trend

AbstractThe article analyses the Lithuanian dairy sector companies’ financial performance and its determinants. Economic value added (EVA) is employed in the paper as a measure of financial performance and labour productivity, revenue from exporting, gross profit margin and cost of debt are used as independent variables to identify determinants influencing performance. The results of the analysis show that EVA (as financial performance measure) fluctuates during the periods and has an opposite trend direction in some periods for some companies. The revenue from exporting and gross margin are found to have a significant positive impact on EVA (financial performance measure).

Analisis Kinerja Keuangan Perusahaan dengan Menggunakan Pendekatan Economic Value Added (EVA) dan Market Value Added (MVA) (Studi Kasus pada PT Astra International, Tbk. Periode Tahun 20082012)

2017 ◽  
Vol 1 (1) ◽  
Author(s):  
Abdul Hamid
Keyword(s):  
Financial Performance ◽  
Financial Services ◽  
Stock Price ◽  
Economic Value ◽  
Composite Index ◽  
Value Added ◽  
Secondary Data ◽  
Study Approach ◽  
Market Value Added ◽  
The Interest Rate

This study is a qualitative study using a case study approach to the PT. Astra International, Tbk. The object of this research is PT. Astra International, Tbk. PT. Astra International, Tbk is a company engaged in six business sectors, namely: automotive,financial services, heavy equipment, mining and energy, agribusiness, information technology, infrastructure and logistics. Researchers chose PT. Astra International, Tbk as research objects due in the year 2012, PT. Astra International, Tbk managed to rank first in the list of 100 Best Companies to Go Public by the 2011 financial performance of Fortune magazines Indonesia. The data used in this research is secondary data, the financial statements. Astra International, Tbk 20082012. Other secondary data used is the interest rate of Bank Indonesia Certificates (SBI), the Jakarta Composite Index (JCI), and thecompanys stock price began the year 20082012. This study aims to determine the companys financial performance by the use of EVA and MVA approach, therefore the data analysis technique used is the EVA and MVA. Based on the value EVA of the year 2008 2012, PT. Astra International, Tbk has good financial performance that managed to meet the expectations of the company and the investors. Based on the value of MVA during the years 20082012, PT. Astra International, Tbk managed to create wealth and prosperity for companies and investors. It concluded that financial performance. AstraInternational, Tbk for five years was satisfactory.

KOMPARASI KINERJA KEUANGAN MELALUI PENDEKATAN ECONOMIC VALUE ADDED (EVA) PADA PERUSAHAAN TRANSPORTASI DI JAKARTA

2018 ◽  
Vol 3 ◽  
pp. 223-232
Author(s):  
Dwi Urip Wardoyo
Keyword(s):  
Financial Performance ◽  
Service Industry ◽  
Economic Value ◽  
Value Added ◽  
Added Value ◽  
Economic Value Added ◽  
Test Analysis ◽  
Transportation Service ◽  
Income Statement

This study aims to compare financial performance through profitability generated by two market participants in the witness transportation service industry in Jakarta, namely PT. BB compared to PT. ETU, this assessment is measured not limited to the profit generated but more than that by measuring financial added value through the concept of Eonomic Value Added produced by the two companies. The population in this study were all taxi transportation service companies in Jakarta. The sampling method selected two taxi companies that have the largest market share in DKI Jakarta, namely BB Taxi and ETU Taxi. The test analysis used in this study is ratio analysis through profit calculation and economic added value from the annual income statement. This study shows that there are (a) determination of the ratio of profit levels, (b) Determination of the comparison of economic value added of the two companies. Keywords :  Financial performance, Economic Value Added (EVA)

scholarly journals Performance Management for Growth: A Framework Based on EVA

2021 ◽  
Vol 14 (3) ◽  
pp. 102
Author(s):  
Mihaela Brindusa Tudose ◽  
Valentina Diana Rusu ◽  
Silvia Avasilcai
Keyword(s):  
Statistical Analysis ◽  
Performance Management ◽  
Performance Appraisal ◽  
Business Performance ◽  
Reference Model ◽  
Corporate Sustainability ◽  
Economic Value ◽  
Value Added ◽  
Research Perspectives

Some of the constructs in the field of performance management are intuitive or not empirically validated. This study provides a data-driven framework for measuring and improving the performance through synchronized strategies. The ultimate goal was to provide support for increasing business performance. Empirical research materializes in an exploratory case study and a statistical analysis with econometric models. The case study revealed that a company can improve its performance, even in periods of growth, being characterized by consistent investments. The statistical analysis, performed on a restricted sample of companies, confirmed the results that were provided by the case study. The measurement of performance was made by capitalizing on financial and non-financial data precisely to intensify the interest for corporate sustainability. The obtained results, contrary to previous research that showed that economic value added (EVA) is negatively influenced by the increase in invested capital, open up new research perspectives to find out whether, at the industry level, performance appraisal that is based on EVA stimulates the development of a business’s economic capital. The research has a double utility: scientific (by providing an overview of the state of the art in the field of performance management) and practical (by providing a reference model for measuring and monitoring performance).

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