POPA Gabriela () (The Bucharest Academy of Economic Studies, Romania) MIHAILESCU Laurentiu () (The Bucharest Academy of Economic Studies, Romania) CARAGEA Codin () (OTP Bank, Bucharest, Romania)
Abstract
EVA (Economic Valued Added) is a modern financial measurement tool that determines if a business is earning more than its true cost of capital. Including a cost for the use of equity capital sets EVA apart from more popular measures of bank performance, such as return on assets (ROA), return on equity (ROE), net banking income and the efficiency ratio, which do not consider the cost of equity capital employed. As a result, these measures may suggest a bank is performing well, when in fact it may be diminishing its value to its shareholders. EVA is a tool that focuses on maximizing shareholder wealth. EVA is an appropriate tool for motivation system and in this way it motivates managers to think like owners; and provides a common language within the corporate culture. The EVA application in banks is relatively new (it started to be implemented in U.S. in 1994) and is not as well known as other measures of bank performance. As in the Romanian Banking system this measurement method is not familiar or used, the purpose of this study is to introduce EVA and its advantages compared to other performance indicators and based on this study to try to implement it in one of the Romanian banks.
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Volume (Year): 12 (2009) Issue (Month): 1 Special (July) Pages: 168-173 Download reference. The following formats are available: HTML
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Find related papers by JEL classification: G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Investment Policy G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure M21 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - Business Economics M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives
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