Does Economic Value Added (EVA) Improve Stock Performance Profitability?

The Journal of Applied Finance, Fall/Winter 2005, 101-113

13 Pages Posted: 17 Oct 2013

See all articles by Robert Ferguson

Robert Ferguson

AnswersToGo

Joel Rentzler

City University of New York (CUNY) - Baruch College

Susana Yu

Iona College

Date Written: September 30, 2005

Abstract

This article uses event study methodology to investigate whether firms adopt Stern Stewart's EVA system due to poor stock performance (i.e., poor profitability) and whether adopting EVA leads to better stock performance (i.e., greater profitability). There is insufficient evidence to conclude that poor stock performance leads firms to adopt EVA or that adopting EVA improves stock performance. Firms that adopt EVA appear to have above average profitability relative to their peers both before and after the adoption of EVA; further, there is some evidence that EVA adopters experience increased profitability relative to their peers following adoption.

Keywords: EVA, Stern Stewart, profitability, stock performance

JEL Classification: G14

Suggested Citation

Ferguson, Robert and Rentzler, Joel and Yu, Susana, Does Economic Value Added (EVA) Improve Stock Performance Profitability? (September 30, 2005). The Journal of Applied Finance, Fall/Winter 2005, 101-113. Available at SSRN: https://ssrn.com/abstract=2335465

Robert Ferguson (Contact Author)

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Joel Rentzler

City University of New York (CUNY) - Baruch College ( email )

17 Lexington Avenue
New York, NY 10010
United States

Susana Yu

Iona College ( email )

715 North Avenue
New Rochelle, NY 10801
United States

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