Shareholder Value Creators and Shareholder Value Destroyers in USA: Year 2000
University of Navarra - IESE Business School
June 4, 2001
In this paper, we quantify shareholder value creation for 274 American companies. We provide the created shareholder value for each and every company for years 1998, 1999, 2000 as well as for 1993-2000. The market value of the 274 companies was 9,680 billion dollars.
We define created shareholder value and provide the ranking of created shareholder value for the 274 companies. In 2000 Phillip Morris was the leading shareholder value creator and, on the other end of the spectrum, Microsoft was the top shareholder value destroyer.
We also calculate the cumulative created shareholder value of selected American companies during the three-year period 1998-2000 and during the eight-year period 1993-2000. General Electric was the first company in both, created shareholder value and equity market value in 2000.
We claim that EVA does not properly measure Wealth Creation. We have compared EVA calculated by Stern Stewart and Co with created shareholder value of 269 companies. The correlation of EVA with created shareholder value was only 17.66%. 60 companies had negative EVA and positive created shareholder value. 64 companies had positive EVA and negative created shareholder value. On average, the difference of shareholder value creation minus EVA was -434% of EVA. The absolute value of the difference of shareholder value creation minus EVA was 8972% of EVA. With this evidence, we conclude that EVA does not properly measure Wealth Creation.
Number of Pages in PDF File: 20
Keywords: Shareholder value creation; Created shareholder value; Equity market value; Shareholder value added; Shareholder return; Required return to equity; EVA
JEL Classification: G12, G31, M21, M40, M46working papers series
Date posted: June 6, 2001
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