Performance Management for Growth: A Framework Based on EVA

Tudose, Mihaela Brîndușa; Rusu, Valentina Diana; Avasilcăi, Silvia

doi:10.3390/jrfm14030102

Cited by 11 publications

(13 citation statements)

References 42 publications

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“…In this case, ROA seems to affect EVA if the company can more optimally use Current Assets to increase profits. These results contradict the research by Tudose, et al (2021), showing that ROA has a positive and significant effect on EVA. Still, the results of this test are in line with the research by Bhusan & Kumar (2016), which shows that there is no significant effect between financial performance on EVA.…”

Section: There Is An Effect Of Return On Assets (Roa) On Economic Val...contrasting

confidence: 99%

“…Statistical test results show the value of the level of Indebtedness (LI) in Model 1 has a significance value of 0.0064 < 0.05 and in Model 2 has a significance value of 0.0165 < 0.05, so it can be concluded that the LI has a negative and significant effect on EVA; this means that the more debt the company has, the lower the EVA. These results contradict Tudose et al (2021) and Widasari (2014), which show that the LI and variable debt ratio does not affect EVA.…”

Section: There Is An Effect Of Return On Assets (Roa) On Economic Val...contrasting

confidence: 76%

“…According to the methodological framework, performance as a measure of economic profit is the difference between Net operating profit after tax (NOPAT) and capital investment cost. If Economic Value Added is positive, the organization creates value and vice versa (Tudose et al, 2021). EVA differs from other traditional performance values, such as gain per share, gross operating surplus, and return on sales.…”

Section: Introductionmentioning

confidence: 99%

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Performance of Indonesian manufacturing companies: Economic value-added approach

Tjandra

Sulistyorini

Mulia

et al. 2022

jiko

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This study aims to measure the company's performance based on Economic Value Added (EVA). The independent variables are Investment Capital, Return on Assets, Fixed Assets, Rate of Return on Fixed Assets, and Level Debt. This study uses data from 25 manufacturing companies listed on the Indonesia Stock Exchange over the 2016-2019 period. This study shows a significant negative effect of Investment Capital and Debt Level on EVA. The variable rate of return on fixed assets has a substantial impact on EVA, and there is no significant effect of the return on assets and fixed assets on EVA. Thus, it is expected that financial managers can increase profits and reduce debt to increase EVA.

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Section: There Is An Effect Of Return On Assets (Roa) On Economic Val...contrasting

confidence: 99%

Section: There Is An Effect Of Return On Assets (Roa) On Economic Val...contrasting

confidence: 76%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Performance of Indonesian manufacturing companies: Economic value-added approach

Tjandra

Sulistyorini

Mulia

et al. 2022

jiko

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“…They also showed that EVA and residual income variables are highly correlated and identical to stock returns. Like those authors mentioned above, other researchers [41][42][43][44][45] and authors of more recent studies, e.g., [46][47][48][49][50][51][52][53][54], have also found the EVA useful in financial risk mitigation.…”

Section: Literature Reviewmentioning

confidence: 82%

Can the Economic Value Added Be Used as the Universal Financial Metric?

et al. 2022

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Previous research into Economic Value Added (EVA) has extensively described it as a business metric of firms. Still, no studies have confirmed or denied that EVA is a universal metric and that one may use EVA in unstable markets in the same way as in stable and developed economies. Meanwhile, the green energy revolution, ensuring carbon neutrality through green innovations, requires enormous investments, and the projects realised must be appropriately tailored. These projects are realised by different firms, including those from developing countries, and investors need solid financial metrics. The study determines whether EVA is a universal metric of owners’ value in the energy sector. The research proves that this metric does not correctly reflect the limitations of emerging markets, can lead to incorrect managerial decisions and limit shareholders’ value. Therefore, there is a need to reanalyse financial metrics used in financial planning, including EVA. The study eliminates this research gap and, based on data from seven countries and the Euro Zone, explains why one may not perceive the currently used EVA formula as a universal financial metric. Consequently, the study modifies the EVA formula and presents a universal solution tailored to unstable economies. In the conducted research, literature studies were used, taking into account the methodology of a systematic literature review, including bibliometric analysis. Based on this review, it is shown that little is known about whether EVA as a financial measure can be used in energy management. Two conclusions emerged: first, the research contributes to developing the business and management science; second, identifying risks associated with EVA metrics helps practitioners. In addition, the study defined further research directions.

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“…Considering that financial rates are not sufficient to assess performance in today's competitive economy (Safaei Ghadikolaei et al, 2014), the literature has focused on measures based on economic added value. EVA, considered a fourth-generation indicator, has come to the attention of researchers by allowing managers to perform four types of interventions (Kijewska, 2016;Tudose et al, 2021): a) increase the net profit margin (expression of increased efficiency activity); b) increase in sales; c) diminution of the value of the invested capital when it is not fully capitalized; d) optimization of the capital structure.…”

Section: Methodsmentioning

confidence: 99%

Financial Performance – Determinants and Interdependencies Between Measurement Indicators

Tudose

Rusu

Avasilcăi

2022

Business, Management and Economics Engineering

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Purpose – the study has a dual purpose. First, to assess the impact of the most important determinants of financial performance, which have been measured through four generations of indicators. In addition, the study provides the first quantification of interdependencies between different financial performance measures: profit margin (PM), profit growth rate (PGR), return on assets (ROA), return on equity (ROE), and economic value added (EVA). Research methodology – the primary data was collected from the AMADEUS database. Empirical research was conducted on a relatively homogeneous sample from the automotive industry, using the panel data method for the period 2010–2019. Two models were tested. The first model highlights the relationships between performance measures and selected determinants. The second model highlights the relationship between the different performance measures and the determinants used in the first model. Findings – the determinants analysed have different influences on the selected performance measures. For example, in the first model, the results statistically significant indicated the following. The current ratio has a positive influence on ROA, but a negative one on ROE and EVA. Gearing has a negative influence on PM and ROA, but a positive one on EVA. The growth rate of sales has a positive influence on PM, but a negative one on ROA and EVA. The size of the company has a positive influence on three performance measures (PM, ROA, and EVA). Regarding the relationships between the different performance measures (second model), the research indicates that EVA is negatively influenced by PGR and ROA. In this model, the determinants analysed maintain their meaning and intensity of influences. Research limitations – the article has several limitations. The representativeness of the results is valuable only at the level of the researched industry. In addition, it should be noted that the analyses are focused only on financial performance, assessed by accounting measures. The authors are considering conducting comparative analyses at the level of fields/branches of activity to capture not only the impact of determinants on financial performance but also to assess organizational resilience. Practical implications – The research provides clues to managers and financial decision-makers to increase the financial performance of the companies they lead. Originality/value – the originality of the study lies in the presented methodological approach. Unlike previous research, which usually evaluated performance on only one indicator, this paper aims to assess the impact of the most important determinants on five performance measures. In addition, the analysis of the interdependencies between the different performance measures is another novelty of this research.

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Performance Management for Growth: A Framework Based on EVA

Cited by 11 publications

References 42 publications

Performance of Indonesian manufacturing companies: Economic value-added approach

Performance of Indonesian manufacturing companies: Economic value-added approach

Can the Economic Value Added Be Used as the Universal Financial Metric?

Financial Performance – Determinants and Interdependencies Between Measurement Indicators

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