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

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  • Roberto Ghiselli Ricci
  • Carlo Alberto Magni

Abstract

Two measures of excess profit (residual income) are currently available in the literature: the standard one, of which Economic Value Added (EVA) (Stewart, 1991) is a major instantiation, and Systemic Value Added (SVA) (Magni, 2003, 2004, 2005), also named lost-capital residual income (Magni, 2009a,b). This paper 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, 2009. "Economic value added and systemic value added: symmetry, aditive coherence and differences in performance," Proyecciones Financieras y Valoración 5736, Master Consultores.
    • Handle: RePEc:col:000463:005736
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    Keywords

    Excess profit (residual income); EVA; SVA; performance measurement;
    All these keywords.

    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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