EVA as a measure for shareholder value and executive compensation - A critical view

Stephan Pietge

Published by GRIN Verlag Jul 2007, 2007
ISBN 10: 3638699668 / ISBN 13: 9783638699662
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Neuware - Bachelor Thesis from the year 2003 in the subject Business economics - Investment and Finance, grade: 1.0 (A), Edinburgh Napier University (Business School), 200 entries in the bibliography, language: English, abstract: For several decades academics have been looking for an efficient performance measure, which not only reflects the effectiveness and efficiency of the firm, but also aligns manager s and shareholder s interests. Even though many studies question the merit of a single measure for overall firm performance, Stern and Stewart claim to have solved the puzzle with a method labeled Economic Value Added (EVA). This paper examines two aspects: First, EVA s predicting power regarding stock returns and second, its impact on management behavior as an element of executive compensation. At first glance, Stern and Stewart seem to be right. During the early 1990s their approach gained tremendous popularity, reflected by dozens of anecdotal success stories. Though EVA s demand of integrating a total capital charge is appealing, the concept is by no means new. The framework of residual income (economic profit), which has been around for decades, also requires a charge for equity capital. Further, some scholars criticize the use of accounting adjustments in order to calculate EVA and its ability to capture performance at the divisional level. So far there is no independent empirical evidence that EVA is superior to accounting measures in predicting stock returns. Some studies even question EVA s incremental value regarding executive compensation by stating that economic profit is doing as good a job. Consequently, it is tempting to doubt that Economic Value Added indeed adds any value. 88 pp. Englisch. Bookseller Inventory #

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Synopsis: Bachelor Thesis from the year 2003 in the subject Business economics - Investment and Finance, grade: 1.0 (A), Edinburgh Napier University (Business School), 200 entries in the bibliography, language: English, abstract: For several decades academics have been looking for an efficient performance measure, which not only reflects the effectiveness and efficiency of the firm, but also aligns manager′s and shareholder′s interests. Even though many studies question the merit of a single measure for overall firm performance, Stern and Stewart claim to have solved the puzzle with a method labeled Economic Value Added (EVA). This paper examines two aspects: First, EVA′s predicting power regarding stock returns and second, its impact on management behavior as an element of executive compensation. At first glance, Stern and Stewart seem to be right. During the early 1990s their approach gained tremendous popularity, reflected by dozens of anecdotal success stories. Though EVA′s demand of integrating a total capital charge is appealing, the concept is by no means new. The framework of residual income (economic profit), which has been around for decades, also requires a charge for equity capital. Further, some scholars criticize the use of accounting adjustments in order to calculate EVA and its ability to capture performance at the divisional level. So far there is no independent empirical evidence that EVA is superior to accounting measures in predicting stock returns. Some studies even question EVA′s incremental value regarding executive compensation by stating that economic profit is doing as good a job. Consequently, it is tempting to doubt that Economic Value Added indeed adds any value.

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Title: EVA as a measure for shareholder value and ...
Publisher: GRIN Verlag Jul 2007
Publication Date: 2007
Binding: Taschenbuch
Book Condition: Neu

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Book Description GRIN Verlag. Paperback. Book Condition: New. Paperback. 92 pages. Dimensions: 8.3in. x 5.8in. x 0.2in.Bachelor Thesis from the year 2003 in the subject Business economics - Investment and Finance, grade: 1. 0 (A), Edinburgh Napier University (Business School), 200 entries in the bibliography, language: English, abstract: For several decades academics have been looking for an efficient performance measure, which not only reflects the effectiveness and efficiency of the firm, but also aligns managers and shareholders interests. Even though many studies question the merit of a single measure for overall firm performance, Stern and Stewart claim to have solved the puzzle with a method labeled Economic Value Added (EVA). This paper examines two aspects: First, EVAs predicting power regarding stock returns and second, its impact on management behavior as an element of executive compensation. At first glance, Stern and Stewart seem to be right. During the early 1990s their approach gained tremendous popularity, reflected by dozens of anecdotal success stories. Though EVAs demand of integrating a total capital charge is appealing, the concept is by no means new. The framework of residual income (economic profit), which has been around for decades, also requires a charge for equity capital. Further, some scholars criticize the use of accounting adjustments in order to calculate EVA and its ability to capture performance at the divisional level. So far there is no independent empirical evidence that EVA is superior to accounting measures in predicting stock returns. Some studies even question EVAs incremental value regarding executive compensation by stating that economic profit is doing as good a job. Consequently, it is tempting to doubt that Economic Value Added indeed adds any value. This item ships from multiple locations. Your book may arrive from Roseburg,OR, La Vergne,TN. Paperback. Bookseller Inventory # 9783638699662

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Book Description GRIN Verlag, Germany, 2013. Paperback. Book Condition: New. 1. Auflage.. Language: English . Brand New Book ***** Print on Demand *****.Bachelor Thesis from the year 2003 in the subject Business economics - Investment and Finance, grade: 1.0 (A), Edinburgh Napier University (Business School), 200 entries in the bibliography, language: English, abstract: For several decades academics have been looking for an efficient performance measure, which not only reflects the effectiveness and efficiency of the firm, but also aligns manager?s and shareholder?s interests. Even though many studies question the merit of a single measure for overall firm performance, Stern and Stewart claim to have solved the puzzle with a method labeled Economic Value Added (EVA). This paper examines two aspects: First, EVA?s predicting power regarding stock returns and second, its impact on management behavior as an element of executive compensation. At first glance, Stern and Stewart seem to be right. During the early 1990s their approach gained tremendous popularity, reflected by dozens of anecdotal success stories. Though EVA?s demand of integrating a total capital charge is appealing, the concept is by no means new. The framework of residual income (economic profit), which has been around for decades, also requires a charge for equity capital. Further, some scholars criticize the use of accounting adjustments in order to calculate EVA and its ability to capture performance at the divisional level. So far there is no independent empirical evidence that EVA is superior to accounting measures in predicting stock returns. Some studies even question EVA?s incremental value regarding executive compensation by stating that economic profit is doing as good a job. Consequently, it is tempting to doubt that Economic Value Added indeed adds any value. Bookseller Inventory # APC9783638699662

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