Does EVA detect the value creation? A study of corporate India

Abstract

An appropriate measure of corporate performance is believed to be highly correlated to firm value on one hand and should be able to signal the extent of periodic wealth creation on the other.

Using a random sample of 1000 companies, this paper examines the power of select performance measures in discriminating the Positive and Negative Value creation of the companies

Examination of the discriminating power of the performance measures for the pooled cross section of data reveals that the EVA has better discrimination power - in predicting the positive Vs negative market value added- than other performance measures and hence it may be considered a better performance measure

Keywords: Performance measures, Discriminating power, Value creation, EVA

JEL Classification: G00, J33, L21, M40, M52