Economic Value Added: Business Performance Measure of Shareholder Value
Indian Institute of Management Lucknow - Noida Campus
Ajay Kumar Garg
University Business School, Panjab University
DAV Sr. Secondary School
Management Accountant, Vol. 34, No. 5, pp. 351-356, May 1999
The KPMG-BS study (1998) assessed top 100 Indian companies on EVA, sales, PAT, and MVA criterion. The survey has used the BS-100 list of companies using a composite index comprising sales, profitability, and compounded annual growth rate to cull out the top 100 Indian companies. The study covered the period 1996-97. The relationship between the ranks given in KPMG-BS(1998) study on four criterion variables for the 98 comapnies were studied by using Spearman's rank correlation coefficient. Though, the rank correlation between economic profit (EP) and PAT, EP and MVA are statistically significant, but it is not substantial. There is a high degree of correlation between PAT and MVA. Hence, EVA, REVA and MVA are better measure of business performance in terms of shareholder value creation and competitive advantage of firm.
Number of Pages in PDF File: 6
Keywords: EVA, Performance Measure, India
JEL Classification: G31, M41Accepted Paper Series
Date posted: January 11, 2005
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