TY - JOUR
TI - Discussion of EVA versus Earnings: Does It Matter Which Is More
Highly Correlated with Stock Returns?
T2 - Journal of Accounting Research
IS -
KW - economic value added (EVA)
AB - A distinctive feature of the paper is its use of both theoretical and
empirical approaches to understanding EVA. The authors first analyze
a principal-agent model using certaine parametric assumptions. They
model EVA and accounting earnings as two distinct, noisy perfomance
measures of the same uderlying construct, with both measures
providing information to the principal about the agent's action
choices. They subsequently derive a theoretical expression for the
percentage value-added contributed by using EVA as a measure for
evaluating managerial perfomance. A key finding is that this
expression can be restated as a function of the observed correlations
of each of the metrics with stock price. In the second part of the
paper, the authors estimate this value for their sample of firms
using time-series data, and then correlate the estimates
cross-sectionally with the decision to adopt EVA by these firms. In
support of the theoretical results, the authors find a positive
association, after controlling for other factors such as size,
leverage, and growth oppportunities.
AU - Rajan, Madhav V.
UR - http://ecsocman.hse.ru/text/16787142/
PY - 2000
SP - 247-254
M2 - 247
VL - 38
SN -
N1 -
LA - EN
CY -
PB -
M3 -
LB -
VL -
ER -