Economic Value Added and Traditional Accounting Measures for Shareholder's Wealth Creation

Panigrahi, S. K. (2017). Economic Value Added and Traditional Accounting Measures for Shareholder’s Wealth Creation. Asian Journal of Accounting and Governance, 8, 125-136.

12 Pages Posted: 31 Jan 2020

Date Written: December 4, 2017

Abstract

This paper investigated performance measurement tools and shareholder’s wealth relationships in the context of Malaysian public listed construction companies. Conventional measures are still utilized by many Malaysian listed companies even though it has been criticized by many researchers. Both traditional accounting measures and economic measures fail to reflect a company’s true value due to the lack of long-term sustainability of a business. The study used panel data analysis techniques, particularly Error Correction Models (ECM) to test the relationship of error terms and panel Ordinary Least Square (OLS) regression to test the hypothesis. Panel data comprised of 280 observations over the period of 2003-2012 indicates that shareholder value is a function of performance measures. The results conclusively support the claims made by previous studies on the role of earnings per share, economic value added (EVA) and dividend payout ratio; and further support the potential usefulness of the performance metric for internal and external performance. Furthermore, market value added (MVA) is found to have a negative relationship with created shareholder value (CSV) contradicting with the theory that confirmed, the increase in shareholder value when there is an increase in stock market value and efficiency.

Keywords: EVA; traditional measures; shareholder’s wealth; dividend policy; Malaysia

JEL Classification: C58, G3

Suggested Citation

Panigrahi, Shrikant, Economic Value Added and Traditional Accounting Measures for Shareholder's Wealth Creation (December 4, 2017). Panigrahi, S. K. (2017). Economic Value Added and Traditional Accounting Measures for Shareholder’s Wealth Creation. Asian Journal of Accounting and Governance, 8, 125-136., Available at SSRN: https://ssrn.com/abstract=3082663 or http://dx.doi.org/10.2139/ssrn.3082663

Shrikant Panigrahi (Contact Author)

University of Buraimi ( email )

P.O. Box 890
Al Buraimi, P.C. 512
Oman
0096892293797 (Phone)

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