TITLE:
Is Economic Value Added Relevant for Market Value? A Sector and Industry Analysis of European Companies
AUTHORS:
Christos G. Kampouris
KEYWORDS:
Economic Value Added, Market Value, Sector Analysis, Industry Analysis, European Stock Exchanges
JOURNAL NAME:
Theoretical Economics Letters,
Vol.12 No.4,
August
11,
2022
ABSTRACT: The objective of the present article is to examine
the effect that Economic Value Added (EVA) has on the market values of
companies. In doing so, we utilize a large
sample of European stocks, over the period 2015-2020, and compare the above
relationship between secondary and service sector firms, along with an industry
analysis. The sample firms were classified into six industries, namely
consumer cyclical, consumer non-cyclical, technology, communication, basic
materials and industrial. A single index regression analysis model was employed
having economic spread as the independent variable and the ratio of market
value over the invested capital as the dependent variable. The results unveiled
a statistically significant positive relationship between the ratio of value
over invested capital and economic spread for both the service and secondary
sector. On an industry basis the statistically significant positive
relationship between the variables of the regression model exists only in the
consumer cyclical, consumer non-cyclical and the basic materials industry.