scholarly journals The information content of Economic Value Added of food-processing firms in the Czech Republic in the comparison with the information content of traditional performance metrics

2006 ◽  
Vol 54 (6) ◽  
pp. 77-84
Author(s):  
Gabriela Chmelíková
Keyword(s):  
Information Content ◽  
Performance Measures ◽  
Food Processing ◽  
Performance Metrics ◽  
Empirical Studies ◽  
Economic Value ◽  
Value Added ◽  
Superior Performance ◽  
Economic Value Added ◽  
Traditional Performance

The topic of this paper is motivated by the increasing popularity of Economic Value Added (EVA) and by the need to make the managing process of Czech agribusiness firms more efficient. Through adoption of EVA principle, the proponents of EVA argue, that EVA will lead to increased efficiency in the management and allocation of all assets and hence increased shareholder value. Though from the theoretical point of view EVA is seen as a superior performance metric, the results of the most empirical studies do not support this claim. One of the standard argument against EVA superiority results from the statistical survey of the relationship between EVA and traditional performance measures. Despite of the results of the most empirical studies this paper assumes (with regard to the specifics of Czech food processing sector) a difference in information content of EVA and traditional performance metrics. The intent of this article is to provide a simple regression test of the hypothesis that between EVA and traditional performance metrics is not tight linear dependency, which would point out that EVA has the same information content as traditional performance measures. The regression results indicate in all cases a positive correspondence between EVA and financial performance metrics with very low dependency of EVA on the financial metrics, which supports the examined hypothesis.

scholarly journals EVA measure and ability of the firm to create shareholder wealth

2007 ◽  
Vol 55 (6) ◽  
pp. 65-74 ◽  
Author(s):  
Gabriela Chmelíková
Keyword(s):  
Performance Measures ◽  
Capital Market ◽  
Food Processing ◽  
Economic Value ◽  
Value Added ◽  
Shareholder Wealth ◽  
Quality Information ◽  
Economic Value Added ◽  
Traditional Performance ◽  
The Relationship

This paper is devoted to the possibilities of Economic Value Added index usage in the conditions of Czech food-processing industry and is trying to provide independent empirical evidence on the indicator’s qualities. The EVA proponents attach to it a superiority compared to other common performance measures. The aim of this article is to investigate the relationship between Economic Value Added, traditional performance measures (ROA and ROE) and ability of creation of shareholder wealth for food-processing firms in the Czech Republic. The way of intended comparison is not dissimilar to the main world studies, which are quoted in this paper. A critical point of the EVA’s application in the conditions of Czech economy is a lack of good quality information from capital market, which at the same time, serve as an exogenous criterion for assessing the quality of the examined measures in the mentioned studies. In the absence of quality capital market information, a criterion for assessing the information content of performance measures suitable for conditions of Czech economy is developed in this paper. This also shows how to circumvent the handicap of the available data.The intent of this article is fulfilled by providing a simple regression test of the hypothesis, that the EVA measure is more associated with improved shareholder wealth than traditional performance measures ROA and ROE. The results of regression analysis show higher quality information content of EVA indicator in the relationship to the ability of shareholder wealth creation than traditional performance measures. This fact supports the tested hypothesis as well as the conclusions of corporate finance theory, that from the theoretical point of view EVA is seen as a superior performance metric.

Is refined economic value added more associated with stock return than accounting measures? The Malaysian evidence

2016 ◽  
Vol 38 (1) ◽  
pp. 69-85
Author(s):  
Habibollah Nakhaei ◽  
Nik Intan Norhan Hamid ◽  
Melati Ahmad Anuar ◽  
Karim Nakhaei
Keyword(s):  
Stock Returns ◽  
Information Content ◽  
Regression Models ◽  
Stock Return ◽  
Economic Value ◽  
Value Added ◽  
Economic Value Added ◽  
Incremental Information ◽  
Multiple Regression Models ◽  
Traditional Performance

The paper tests the hypothesis on whether refined economic value added (REVA) is highly associated with stock return compared to traditional performance measures. The goal of the study is to provide empirical evidence on the relative and incremental information content of REVA and traditional performance measures, such as net income (NI), net operational profit after tax (NOPAT), and earning per share (EPS). The study involves 395 non-financial companies listed in Bursa Malaysia over the period of 2002–2011. Pearson correlation coefficient and panel data single and multiple regression models were employed to analyze the data. The empirical results indicate that the relative information content of the REVA was not greater than that of NI and NOPAT to explain stock returns. NI and NOPAT were highly correlated with stock return compared to REVA. Additionally, the incremental information content test indicated that REVA makes some additional contribution to information content beyond the NI, NOPAT, and EPS. Finally, the panel multiple regression models showed that there was a strong relationship between NI, NOPAT, and REVA with stock return, but there was no meaningful association between EPS and stock returns. Overall, the results do not support the hypothesis that REVA can be considered superior to traditional accounting measures in association with stock returns.

scholarly journals Basis of economic analysis of Czech firms

2010 ◽  
Vol 58 (3) ◽  
pp. 79-84 ◽  
Author(s):  
Gabriela Chmelíková
Keyword(s):  
Financial Management ◽  
Empirical Studies ◽  
Economic Value ◽  
Value Added ◽  
Point Of View ◽  
Superior Performance ◽  
Theoretical Point ◽  
Economic Value Added ◽  
Performance Metric ◽  
Economic View

When looking for connections between particular business’s activities, theory of financial management uses pyramidal system of indicators. The effectiveness of this tool is based on the appropriate choice of the top indicator. Its decomposition enables to manage firm’s processes from the bottommost organizational levels to the main firm’s mission with respect to the connections between par­ti­cu­lar processes. The aim of this paper was to identify appropriate indicator, which corresponds with creation of firm’s value and design its decomposition. To measure creation of firm’s value it is nowadays very popular to use indicator Economic Value Added (EVA). Though from the theoretical point of view EVA is seen as a superior performance metric, the results of some empirical studies do not support this claim. That is why the information content of EVA was controlled in the concrete conditions of Czech Economy within this article. The results showed eligibility of using EVA in Czech firms and enabled to choose it as the top indicator in the pyramidal system. Ambition of further research is to design a complex of indicators offering a comprehensive economic view on the firm’s per­for­man­ce.

THE FOREIGN BANK EFFECT ON VALUE CREATION IN COMMERCIAL BANKS INCORPORATED IN THAILAND

2008 ◽  
Vol 53 (02) ◽  
pp. 215-244
Author(s):  
CHANTAL HERBERHOLZ
Keyword(s):  
Performance Measures ◽  
Commercial Banks ◽  
Economic Value ◽  
Value Added ◽  
Foreign Bank ◽  
Level Data ◽  
Beneficial Impact ◽  
Domestic Banks ◽  
The Cost ◽  
Traditional Performance

Using quarterly bank-level data over the period 1997–2005, this paper examines the effect of foreign bank presence on commercial banks incorporated in Thailand, using traditional and value-based performance measures as indicators of the degree of competition and proxies for the efficiency in the provision of banking services. The findings suggest that foreign bank presence is not only beneficial in terms of traditional performance measures, but also in terms of economic profit. The results with respect to economic value added and cash value added, however, cast some doubt over the presumed benefits of opening up, underlining the importance of using a proxy that considers the cost of equity and departs from standard accounting principles. Furthermore, the results indicate that foreign entry through the acquisition of domestic banks appears to have a stronger and more beneficial impact on locally incorporated banks than through the establishment of branches, with majority ownership by a foreign blockholder being of importance.

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.

Relationship between EVA (Economic Value Added) and Share Prices of Select Companies in BSE-SENSEX - An Empirical Study

2015 ◽  
Vol 4 (3and4) ◽  
Author(s):  
Mathangi Aravind ◽  
K. Ramya
Keyword(s):  
Performance Metrics ◽  
Explanatory Power ◽  
Economic Value ◽  
Value Added ◽  
Market Value ◽  
Economic Value Added ◽  
Share Prices ◽  
The World ◽  
The Impact ◽  
The Relationship

In todays competitive world, corporate companies all around the world are trying to maximize the wealth of their shareholders in order to gain market value as well as satisfy their stakeholders. With the gaining popularity of value based performance measures like Economic Value Added (EVA), Total Shareholder Return (TSR), Cash Value Added (CVA) etc., many corporate companies in India have started assessing their value in terms of these measures. This paper investigates the relationship between EVA and share prices of select companies in BSE-SENSEX for a period of six years from 2008 to 2013. The study focuses on the explanatory power of EVA with respect to share prices of the selected companies. In turn, the performance of the selected companies belonging to different sectors in BSE-SENSEX was analyzed using EVA. The volatile nature of the capital markets characterized by various speculative activities have a greater influence on share prices, eventually undermining the impact of performance metrics on them. Thus, the findings of the study enumerates that EVA does not have a considerable explanatory power on share prices.

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