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

See all articles by Terrance Jalbert

Terrance Jalbert

University of Hawaii - Department of Business Administration

Brian L. Boscaljon

Pennsylvania State University

Chenchuramaiah Bathala

Cleveland State University

Ramesh P. Rao

Oklahoma State University - Stillwater - Spears School of Business - Department of Finance

Date Written: 2000

Abstract

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

Jalbert, Terrance and Boscaljon, Brian L. and Bathala, Chenchuramaiah and Rao, Ramesh P., EVA as a Predictor of Firm Performance (2000). Journal of Accounting and Finance Research, Vol. 8, No. 3, pp. 83-92, Winter 2000. Available at SSRN: https://ssrn.com/abstract=1463647

Terrance Jalbert (Contact Author)

University of Hawaii - Department of Business Administration ( email )

808-974-7456 (Phone)

Brian L. Boscaljon

Pennsylvania State University ( email )

286 Burke
Erie, PA 16563
United States

Chenchuramaiah Bathala

Cleveland State University ( email )

Cleveland, OH 44115
United States

Ramesh P. Rao

Oklahoma State University - Stillwater - Spears School of Business - Department of Finance ( email )

Spears School of Business
Stillwater, OK 74078-4011
United States
405-744-1385 (Phone)
405-744-5180 (Fax)

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