The relationship between economic value added and the stock market performance of agribusiness firms

Abstract

This article examines the relationship between economic value added (EVA) and the stock market performance of 17 publicly traded companies in the Canadian food processing sector. The research is motivated by the increased popularity of EVA in corporate finance and by the claims that high EVA causes incremental gains in share price values. Using1996 annual reports to compute EVA, and daily stock prices for 1994 through 1998, we attempt to correlate EVA with a variety of measures including accounting return on assets (ROA), return on equity (ROE), share price, the Capital Asset Pricing Model (CAPM) returns and risk, and others. Results find little support for the conjecture that high-EVA firms lead to higher shareholder value, however, because the management logic that has popularized EVA is so logical and fundamental to common practices in corporate finance that we resist dismissing EVA as a valued paradigm. Rather, we suggest that market volatility and other factors mask the short-run increments to shareholder wealth from EVA-implemented strategies. [EconLit citations: G30, Q13.]

Economic value added (eva) as a performance measurement for glcs vs non-glcs: evidence from bursa malaysia

“…EVA it is an estimate of the amount by which earnings exceed or fall short of the rate of return shareholders and lenders could get by investing in other securities of comparable risk and includes a charge against profit for the cost of all the capital a company employs. Isa and Lo (2001), Stewart (1990), Lehn and Makhija (1996), Uyemura et al (1996), Milunovich and Tsuei (1996), Grant (1996) and Turvey et al (2000) carried out on what might be of superior metrics on evaluating firm performance, i.e. either EVA or conventional measures.…”

Study of Information content Economic Value Added in Explain new models based on Free Cash Flow (CVFCFF and CVFCFE)

“…Goetzmann and Garstka (1999) found that long-term survival of companies may be related to accounting earnings, and more, simple EPS does as well or better than EVA at explaining differences across companies and at predicting future performance. Turvey et al (2000) studied the relationship between EVA and share market returns for a sample of 17 publicly traded food firms in Canada. The key finding was that no relationship could be found between the two.…”

The impact of biofuels policy on agribusiness stock prices

“…Turvey et al (2000) employ various measures, including share prices and capital asset pricing model returns, to analyze the relationship between economic value added (EVA) and stock market performance among seventeen Canadian food processing companies. High EVA is not found to be correlated with higher shareholder value.…”