EVA as Superior Performance Measurement Tool


Prior to the East Asian financial crisis scholars found the necessity of a true financial performance measure in Malaysia. After more than one decade of the crisis Malaysian firms still stick with the conventional performance measures, which are criticised due to general accepted accounting principles. In this vein, this study aims to study a value based financial performance measure which can be adopted by the Malaysian firms over the conventional measures currently used. Economic Value Added (EVA) was introduced and advocated by Stern Stewart and Co. in 1982. This study intended to identify why EVA should be used as financial performance measure over the conventional measures and any added value or added advantage in EVA compare to conventional methods. EVA has been able to gain attention of the corporate giants like Coca-Cola, Sprint Corporation and Quaker Oats, as it is able to depict the true profitability of the company, however, there have been very little research conducted on EVA in Asian countries including Malaysia.

Share and Cite:

A. Mamun, H. Entebang and S. Mansor, "EVA as Superior Performance Measurement Tool," Modern Economy, Vol. 3 No. 3, 2012, pp. 310-318. doi: 10.4236/me.2012.33041.

Conflicts of Interest

The authors declare no conflicts of interest.


[1] P. Erasmus, “Value Based Financial Performance Measures: An Evaluation of Relative and Incremental Information Content,” Corporate Ownership & Control, Vol. 6, No. 1, 2008, pp. 66-77.
[2] D. Maditinos, Z. Sevic and N. Theriou, “A Review of the Empirical Literature on Earnings and Economic Value Added (EVA) in Explaining Stock Market Returns. Which Performance Measure Is More Value Relevant in the Athens Stock Exchange (ASE)?” Annual Conference of the Hellenic Finance and Accounting Association Thessaloniki, 15-16 2006
[3] W. Fredrik, “Value Based Management: Economic Value Added or Cash Value Added?” Gothenburg Studies in Financial Economics, 971214 1997,
[4] J. Grant, “Foundations of Economic Value Added,” 2nd Edition, John Wiley & Sons, New York, 2003.
[5] A. C. Worthington and T. West, “Economic Value-Added: A Review of the Theoretical and Empirical Literature,” Asian Review of Accounting, Vol. 9, No. 1, 2001, pp. 67- 86. doi:10.1108/eb060736
[6] I. Issham, “Company Performance in Malaysia after the 1997 Economic Crisis: Using Economic Value Added (Eva) as a Predictor,” African Journal of Business Management, Vol. 5, No. 7, 2011, pp. 3012-3018.
[7] M. Anne, A. M. Anderson, R. P. Bey and C. S. Weaver, “Economic Value Added Adjustments: Much to Do about Nothing?” 2005.
[8] R. Hamilton, “An Introduction to Merchandize,” Edinburgh, 1777.
[9] A. Marshall, “Principles of Economics,” MacMillan & Company, New York, 1890.
[10] M. Geyser and I. E. Liebenberg, “Creating a NEW Value Tool for South African Agricultural Co-operatives,” Agrekon, Vol. 42, No. 2, 2003, pp.
[11] W. D. Dagogo and G. W. Ollor, “The Effect of Venture Capital Financing on the Economic Value Added Profile of Nigerian SMEs,” African Journal of Accounting, Economics, Finance and Banking Research, Vol. 5. No. 5. 2009, pp.
[12] D. Young, “Economic Value Added: A Primer for European Managers,” European Management Journal, Vol. 15, No. 4, 1997, pp. 335-343. doi:10.1016/S0263-2373(97)00014-5
[13] K. A. Sharma and S. Kumar, “Economic Value Added (EVA)—Literature Review and Relevant Issues,” International Journal of Economics and Finance, Vol. 2, No. 2, 2010, pp.
[14] G. B. Stern, “EVA: Fact and Fantasy,” Journal of Applied Corporate Finance, Vol. 7, No. 2, 1994, pp 71-87. doi:10.1111/j.1745-6622.1994.tb00406.x
[15] V. D. Ramana, “Market Value Added and Economic Value Added: Some Empirical Evidences,” Bhuabneswar-751013. 2003.
[16] G. B. Stern, “The Quest for Value: A Guide for Senior Managers,” Harper Business, New York, 1991.
[17] K. Lehn and A. K. Makhija, “EVA and MVA as Performance Measures and Signals for Strategic Change,” Strategy & Leadership, Vol. 24, No. 3, 1996, pp. 34-38. doi:10.1108/eb054556
[18] S. Chen and J. L. Dodd, “Economic Value Added: An Empirical Examination of a New Performance Measure,” Journal of Management Issues, Vol. 9, No. 3, 1997, pp. 301-336.
[19] S. N. Abdullah, “Board Composition, CEO Duality and Performance among Malaysian Listed Companies,” Corporate Governance, Vol. 4, No. 4, 2004, pp. 47-61. doi:10.1108/14720700410558871
[20] J. D. Villiers, “The Distortions in Economic Value Added (EVA) Caused by Inflation,” Journal of Economics and Business, Vol. 49, No. 3, 1997, pp. 285-300. doi:10.1016/S0148-6195(97)00001-5
[21] A. C. Worthington and T. West, “Economic Value-Added: A Review of the Theoretical and Empirical Literature,” Asian Review of Accounting, Vol. 9, No. 1, 2001, pp. 67-86. doi:10.1108/eb060736
[22] M. Haque, M. Akter and N. C. Shil, “Value-Based Measure: An Application of Eva in Small Manufacturing Company in Bangladesh,” Munich Personal RePEc Archive, Vol. , No. 7711, 2004, p. 12.
[23] Al-Amin and D. M. Hossain, “Economic Value Addition: From Stakeholders Point of View,” The Bangladesh Accountant, October 03-March 04, 2004, pp.106-108.
[24] J. Forker and R. Powell, “Does EVA Beat Earnings? Evidence on Associations with Stock Returns and Firm Values—Revisited,” EAA Meeting, Prague, 1-3 April 2004, pp.
[25] M. Houle, “Economic Value Added,” Liberty University, Lynchburg, 2008.
[26] I. Issham, “Performance of Public-Listed Companies in Malaysia: Using EVA,” 2010.
[27] N. Venkatraman and R. Vasudevan, “Measurement of Business Performance in Strategy Research: A Comparison of Approaches,” Academy of Management Review, Vol. 11, No. 4, 1986, pp. 801-814.
[28] J. J. Cordeiro, and D. D. Kent Jr., “Do EVA Adopters Outperform Their Industry Peers? Evidence from Security Analyst Earnings Forecasts,” Am. Bus. Rev., Vol. 19, No. 2, 2001, pp.
[29] Morse et al., “The Importance of Concept Boundaries,” 1996.
[30] K. C. Yook and G. M. McCabe, “MVA and the Cross- Section of Expected Stock Returns,” Journal of Portfolio Management, Vol. 27, No. 3, 2001, pp. 75-87. doi:10.3905/jpm.2001.319803
[31] F. Weissenrieder, “Value Based Management: Economic Value Added or Cash Value Added?” Gothenburg Studies in Financial Economics, 1997.
[32] J. Mouritsen, “Driving Growth: Economic Value Added versus Intellectual Capital,” Management Accounting Research, Vol. 9, No. 46, 1998, pp. 1-482.
[33] M. J. Stern, B. Stewart, H. D. Chew and Stern Stwart & Co., “The EVA Financial Management System,” Blackwell Pub, 1997.
[34] D. Young, “Some Reflections on Accounting Adjustments and Economic Value Added,” Journal of Financial Statement Analysis, Vol. 4, No. 2, 1999, pp. 7-19.
[35] R. Ray, “Economic Value Added: Theory, Evidence, a Missing Link,” Review of Business, Vol. 22, No. 1-2, 2001, pp. 66-70.
[36] I. Issham, A. S. M. Fazilah, Y. S. Hwa, A. A. Kamil, A. A. Ayub and M. A. Ayub, “Economic Value Added (EVA) as a Performance Measurement for GLCs vs Non-GLCs: Evidence from Bursa Malaysia,” Prague Economic Papers, 2008, pp. 168-179.
[37] I. H. Silverman, “Valuing Technology Stocks with EVA: A Bridge Too Far?” Journal of Business Case Studies, Vol. 6, 2010.

Copyright © 2024 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.