Eonomic Value Added

EVA VERSUS TRADITIONAL ACCOUNTING MEASURES OF PERFORMANCE AS DRIVERS OF SHAREHOLDER VALUE – A COMPARATIVE ANALYSIS Dumitru Andreea Paula, Assistant Ph., “Romanian-American University”, Bucharest Dumitru Cristina Elena, Assistant Ph., “University Politehnica of Bucharest” Several researchers and practitioners have claimed that economic value added (EVA) is superior to traditional accounting measures in driving shareholder value. Other researchers have refuted these claims by supplying data in support of traditional accounting indicators such as earnings per share (EPS), dividends per share (DPS), return on assets (ROA) and return on equity (ROE). This study endeavoured to analyse the results of companies listed on the Securities Exchange, using market value added (MVA) as a proxy for shareholder value.The results suggest stronger relationships between MVA and cash flow from operations. The study also found very little correlation between MVA and EPS, or between MVA and DPS, concluding that the credibility of share valuations based on earnings or dividends must be questioned.

Introduction To create value for the entire company means to maximize the total value. Traditional financial measures reflect historical performance, having a limited relevance for anticipate the future evolution of performance. These measures take into account only the effects of using the invested capital into affair and not the cost of capital too. Most companies have superior financial performances, but in fact their activities don’t generate value but drive to a permanent loss in value. The modern measures are based on the concept “to create value”. Is there a single measure of corporate performance enabling investors to identify investment opportunities and motivate managers to make value-added business decisions? The usefulness of traditional accounting measures, such as earnings per share (EPS), return on assets (ROA) and return on equity (ROE), and their effect on shareholder...