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Creating Wealth for Shareholders: Evaluating the Performance of the Malaysia Property Companies

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  • Wan Mahmood, Wan Mansor
  • Norfarah Hani, Yahaya

Abstract

This paper measures property companies’ performance under new economic performance metric known as Economic Value Added (EVA) and identifies which companies perform better. The EVA of 27 Malaysia property companies are computed and analysed during the periods of 1997 through 2006. The EVA is an economic performance metric proposed by Stern Stewart Management Services. It claims to have successfully eliminated financial and accounting distortions and provides a true measure of a company’s success in driving shareholder value. Overall, the result of the present study shows that most property companies in Malaysia fail to generate enough income to cover their cost of capital, and thus indicating failure in creating corporate wealth. In order to have positive EVA in the future, firms must improved their strategic and scenario planning. In realizing this, management should focus more on investing capital in the high return projects and at the same time improving on optimal capital structure.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 14602.

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Date of creation: 20 Mar 2008
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Handle: RePEc:pra:mprapa:14602

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Related research

Keywords: Wealth creation; Economic Value Added; Malaysian property companies; performance; NOPAT;

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  1. Fatemi, Ali & Desai, Anand S. & Katz, Jeffrey P., 2003. "Wealth creation and managerial pay: MVA and EVA as determinants of executive compensation," Global Finance Journal, Elsevier, vol. 14(2), pages 159-179, July.
  2. Fiordelisi, Franco, 2007. "Shareholder value efficiency in European banking," Journal of Banking & Finance, Elsevier, vol. 31(7), pages 2151-2171, July.
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