Economic Value Added and Systemic Value Added: Symmetry, Additive Coherence and Differences in Performance

Ghiselli Ricci, Roberto; Magni, Carlo Alberto

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Economic Value Added and Systemic Value Added: Symmetry, Additive Coherence and Differences in Performance

Applied Financial Economics Letters, Vol. 2, No. 3, pp. 151-154, May 2006

8 Pages Posted: 26 Jul 2009

See all articles by Roberto Ghiselli Ricci

Carlo Alberto Magni

Università degli studi di Modena e Reggio Emilia (UNIMORE) - School of Doctorate E4E (Engineering for Economics-Economics for Engineering)

Date Written: May 2006

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.

Keywords: excess profit (residual income), EVA, SVA, performance measurement

JEL Classification: M41, G11, G12, G31

Suggested Citation: Suggested Citation

Ghiselli Ricci, Roberto and Magni, Carlo Alberto, Economic Value Added and Systemic Value Added: Symmetry, Additive Coherence and Differences in Performance (May 2006). Applied Financial Economics Letters, Vol. 2, No. 3, pp. 151-154, May 2006, Available at SSRN: https://ssrn.com/abstract=1439008