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Economic Value Added --- A General Perspective

Author

Listed:
  • Asish K. Bhattacharya

    (Indian Institute of Management Calcutta)

  • B.V. Phani

    (Indian Institute of Management Calcutta)

Abstract

This paper explains the concept of Economic Value Added (EVA) that is gaining popularity in India. The paper examines whether EVA is a superior performance measure both for corporate reporting and for internal governance. It relied on empirical studies in U.S.A. and other advance economies. It concluded that though EVA does not provide additional information to investors, it can be adapted as a corporate philosophy for motivating and educating employees to differentiate between value creating and value destructing activities. This would lead to direct all efforts in creating shareholder value. The paper brings to attention the dangerous trend of reporting EVA casually that might mislead investors.

Suggested Citation

  • Asish K. Bhattacharya & B.V. Phani, 2005. "Economic Value Added --- A General Perspective," Finance 0504003, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0504003
    Note: Type of Document - pdf; pages: 28. PDF, ~200KB, 28 pages
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/fin/papers/0504/0504003.pdf
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    References listed on IDEAS

    as
    1. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    2. Al Ehrbar & G. Bennett Stewart, 1999. "The Eva Revolution," Journal of Applied Corporate Finance, Morgan Stanley, vol. 12(2), pages 18-31, June.
    3. Jensen, Michael C. & Ruback, Richard S., 1983. "The market for corporate control : The scientific evidence," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 5-50, April.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Anca Munteanu & Petre Brezeanu, 2012. "Between Parcimony and Complexity: Comparing Performance Measures for Romanian Banking Institutions," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 12(1), pages 225-232.
    2. Miron Vasile Cristian Ioachim & Focsan Eleonora Ionela, 2017. "The Analysis Of The Performance Of Companies Based On The Economic Value Added," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 181-190, February.

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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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