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Economic value added and systemic value added: symmetry, additive coherence and differences in performance

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  • Roberto Ghiselli Ricci
  • Carlo Alberto Magni

Abstract

Two measures of excess profit are currently available in the literature: Economic Value Added (EVA) (Stewart, 1991) and Systemic Value Added (SVA) (Magni, 2003a, b, 2004; 2005). This study shows that, unlike EVA, SVA is symmetric and additively coherent. Also, EVA and SVA are not simply different in value but also convey different information about good or bad performances.

Suggested Citation

  • Roberto Ghiselli Ricci & Carlo Alberto Magni, 2006. "Economic value added and systemic value added: symmetry, additive coherence and differences in performance," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 2(3), pages 151-154, May.
  • Handle: RePEc:taf:apfelt:v:2:y:2006:i:3:p:151-154
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    References listed on IDEAS

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    1. Magni, Carlo Alberto, 2005. "On decomposing net final values: EVA, SVA, and shadow project," MPRA Paper 12357, University Library of Munich, Germany.
    2. Carlo Magni, 2005. "On Decomposing Net Final Values: Eva, Sva and Shadow Project," Theory and Decision, Springer, vol. 59(1), pages 51-95, August.
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    Cited by:

    1. Magni, Carlo Alberto, 2009. "Splitting up value: A critical review of residual income theories," European Journal of Operational Research, Elsevier, vol. 198(1), pages 1-22, October.
    2. Roberto Ghiselli Ricci & Carlo Alberto Magni, 2014. "Axiomatization of residual income and generation of financial securities," Quantitative Finance, Taylor & Francis Journals, vol. 14(7), pages 1257-1271, July.
    3. Carlo Alberto Magni, 2007. "A Sum&Discount Method for Appraising Firms: An Illustrative Example," Department of Economics 572, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
    4. Magni, Carlo Alberto, 2010. "Residual income and value creation: An investigation into the lost-capital paradigm," European Journal of Operational Research, Elsevier, vol. 201(2), pages 505-519, March.
    5. Carlo Alberto Magni, 2009. "Opportunity Cost, Excess Profit, and Counterfactual Conditionals," Frontiers in Finance and Economics, SKEMA Business School, vol. 6(1), pages 118-154, April.
    6. Magni, Carlo Alberto, 2005. "On decomposing net final values: EVA, SVA, and shadow project," MPRA Paper 12357, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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