ECONOMIC VALUE ADDED (EVA) AS A PROXY FOR MARKET VALUE ADDED (MVA) AND ACCOUNTING EARNINGS: EMPIRICAL EVIDENCE FROM THE BUSINESS CYCLE

Further understanding of the significance of EVA issue, i.e., 1) whether stock prices follow EVA better than a traditional accounting measure such as earning per share (EPS), 2) how correlation between EVA and MVA are affected by two different economic periods, and 3) whether there is effectiveness of EVA at the industry level. We find no evidence that increase in the change in EVA is attributable to increases in the market-adjusted returns (MAR) regardless of the stage of the business cycle. However, strong positive correlation between EVA and MVA from both parametric and nonparametric tests are more evident during the contraction period. Finally, we also find that the market response to accounting earning, not EVA, is more prone to volatile swings in the manufacturing sector than non-manufacturing industries.
Publisher
Jackson, MS : The Academy
Issue Date
2004
Language
ENG
Citation

JOURNAL OF ACCOUNTING AND FINANCE RESEARCH, pp.40 - 49

ISSN
1093-5770
URI
http://hdl.handle.net/10203/6633
Appears in Collection
MT-Journal Papers(저널논문)
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