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
Date Written: September 30, 2005
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: Suggested Citation