EVA as a Predictor of Firm Performance
Journal of Accounting and Finance Research, Vol. 8, No. 3, pp. 83-92, Winter 2000
Posted: 29 Aug 2009 Last revised: 1 Mar 2010
Date Written: 2000
This study tests for abnormal returns as-sociated with firms that incorporate Eco-nomic Value Added (EVATM). Claims made by Stern Stewart & Company are that firms which use EVA performance measures yield higher annual returns than peer groups. In our study the impact of adjusting annual returns for risk is examined. We also examine the capital structure and research and development expenditures for firms that use EVA. We find some evidence to support the hypothesis that EVA firms have abnormal annual risk adjusted returns. We find no evidence of a change in capital structure associated with the use of EVA. We do however find evidence that suggests firms with higher R&D expenditures are more likely to implement EVA measures.
Keywords: EVA, performance measurement
JEL Classification: G3
Suggested Citation: Suggested Citation