Corporate shareholder value creation as contributor to economic growth

Hall, John H.

doi:10.1108/sef-06-2021-0255

Cited by 3 publications

(3 citation statements)

References 42 publications

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“…The concept of EVA is not new. However, due to EVA's heavy reliance on Capital Invested, it is best used for asset-rich companies rather than companies dominated by intangible assets such as technology businesses [23].…”

Section: Resultsmentioning

confidence: 99%

The impact of the application of the economic value-added method in the food company

Bajus

2023

Potr. S. J. F. Sci.

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One of the most popular methods to measure the performance and success of the company has become the economic value added. EVA supports strategic planning, and management can measure and evaluate performance at the division level. Through it, you can find results that are important not only for the company's management and the owners but also for the company's shareholders. For businesses in the market, it is essential to measure and evaluate the performance of the business, as they are exposed to the risk of competition and, of course, pressure from the environment. However, many companies are underestimating this measurement due to time-consuming and evaluating business performance based on financial statements. Therefore, they can only assess traditional indicators, often insufficient to determine the company's performance. The paper aims to inform readers about all necessary information related to the EVA method and draw the calculation on a specific example. We have determined the application of the method to a particular company as our primary goal. Therefore, we can get information on the performance of the selected company. The applied values and data are further applied and interpreted, which results in how the company manages its assets and how it can continue to improve its performance.

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Section: Resultsmentioning

confidence: 99%

The impact of the application of the economic value-added method in the food company

Bajus

2023

Potr. S. J. F. Sci.

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“…According to Hall (2016Hall ( , 2018, indices such as Tobin's Q (QT), Market Value Added (MVA) and market-to-book ratio can be used for VC measurement, but this depends on the specific sector. Hall (2023) emphasizes the need for multiple measures of VC to understand the phenomenon better, arguing that VC is linked to economic growth. Authors such as Jordão and Almeida (2017) and Hall (2016Hall ( , 2023 clarify that the measurement of EFP and VC is still controversial.…”

Section: The Role Of Eva On Vc In the Construction Industrymentioning

confidence: 99%

“…Hall (2023) emphasizes the need for multiple measures of VC to understand the phenomenon better, arguing that VC is linked to economic growth. Authors such as Jordão and Almeida (2017) and Hall (2016Hall ( , 2023 clarify that the measurement of EFP and VC is still controversial. Jordão and Almeida (2017), analyzing the Brazilian market, noted that EFP needs to be observed in terms of profitability, broken down into Gross Margin (GM), Net Margin (NM), EBITDA Margin (EM), and corporate return, broken down into Return on the Assets (ROA), Return on Invested Capital (ROIC) and Return on Equity (ROE), for a more accurate view of the process.…”

Section: The Role Of Eva On Vc In the Construction Industrymentioning

confidence: 99%

Economic-financial performance and value creation in the Brazilian construction industry

Jordão,

Costa

2023

ARLA

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PurposeThis paper aims to analyze the economic-financial performance (EFP) and value creation (VC) in the Brazilian construction industry.Design/methodology/approachBased on the theories of strategy and finance, a quantitative-qualitative, descriptive and explanatory and applied study was carried out, contrasting the performance of the Direcional company and the civil construction industry – both listed on the Brazilian Stock Exchange and the Over-the-Counter Market (B3)FindingsThe analysis of the EFP in the Brazilian construction industry shows that EZTEC, Helbor, Trisul and Direcional were the companies with the best EFP in the period. The analysis of the Economic Value Added (EVA®, henceforth EVA), as a VC metric and basis for assessing the relative technical efficiency score by Data Envelopment Analysis (DEA®, henceforth DEA), revealed that the companies Direcional, EZTEC, MRV and CR2 were considered efficient throughout the period covered. The multicriteria methodology for empirical testing of the EFP and VC allowed not only contrasts Direcional's results with the other companies of the construction industry but also offered a complementary tool for comparative analysis of enterprises of different sizes, structures and realities.Research limitations/implicationsRegardless of any contextual limitations, from a theoretical point of view, the research not only helps fill the research gap aforementioned but also expands knowledge on the topic and demonstrates how this multi-criteria methodology (integrating DEA and EVA) can be used to assess EFP and VC in addition to traditional tools. However, this new approach evaluates, at the same time, corporate and sectorial effectiveness by contrasting the efficiency and efficacy (simultaneously) in the generation of performance and value of a company in relation to the industry.Practical implicationsSignificant implications for managerial practice could be noted by offering a tool to improve company performance and creating a competitive benchmarking process for analysts, investors, managers, financing agencies, shareholders, policymakers and business owners, as well as organizations and sectors in similar situations – who need to assess the EFP and VC holistically and improve their decision-making processes.Originality/valueThe uniqueness and innovation of this research come from the original multi-criteria methodology developed, applied and validated for analysis of EFP and VC. This methodology was operationalized through DEA applied to the companies' EVA, making it possible to compare corporate results and those of the whole industry in a balanced way – an unexplored issue in the literature, especially in emerging economies, opening several avenues for future research.

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Evaluating the Relationship between Accounting Variables, Value-Based Management Variables, and Shareholder Returns: An Empirical Approach

Oke,

Ajeigbe

2024

JRFM

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This study assessed the accounting-based variables and value-based management (VBM) variables that jointly affect firm value and performance. The study applied the causality test and variance decomposition to determine the variability of the variables, and further empirically employed fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) techniques to justify the results. Data covering 356 industries were purposively sampled to arrive at 61 companies spanning 2011–2020. Overall, the causality test found no relationship between economic value added and market value added but only found unidirectional causality from shareholder returns to MVA, EVA to shareholder returns, ROA to MVA, ROE to MVA, EVA to MVA, MVA to EVA, ROE to ROA, EVA to ROA, and EVA to ROE. A very strong bidirectional causality relationship was found between return on asset and shareholder return as a measure of company performance. Further results from the forecast error of the variance decomposition showed that shareholder returns are explained only by its own shock, contributing 45.38 percent in the long run, while the remaining variables, namely market value added, return on asset, return on equity, and economic value added, contribute about 35.96%, 14.06%, 4.08%, and 0.51%, respectively, to predicting the future values of shareholder return. This confirms the relationships between the variables from the short run to the long run. Additionally, results from the FMOL and DOL revealed that all accounting variables and VBM are good approaches for evaluating company performance as the empirical result from ROA, ROE, and EVA revealed positive and significant relationships. This confirms that a combination of both variables would produce a better evaluation as the accounting variables and VBM variables jointly relate to shareholder returns. This study serves as a guide to companies’ management and boards of directors in having better ways to evaluate company performance. Consequently, it is recommended that managers select combinations of accounting and VBM variables that suit their operations and jointly apply them in the performance evaluation of the company. This will be useful in providing both the relative and incremental performance information needed for diverse decision-making.

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Corporate shareholder value creation as contributor to economic growth

Cited by 3 publications

References 42 publications

The impact of the application of the economic value-added method in the food company

The impact of the application of the economic value-added method in the food company

Economic-financial performance and value creation in the Brazilian construction industry

Evaluating the Relationship between Accounting Variables, Value-Based Management Variables, and Shareholder Returns: An Empirical Approach

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