Value Creation: EVA® Value Drivers - The Case of Euronext Lisbon

Abstract

Value-based management has gained prominence in both business and academia, supported by the notion that It is no longer sufficient for a company to generate profit, it is also required that the profit be higher than the cost of the total capital invested in the company. To increase value creation, managers need to understand which are its relevant determinants (value drivers). Therefore, this study aims to identify the main value creation drivers measured by EVA® (economic value added), one of the value-based performance measures more referenced in financial literature. A sample of non-financial listed companies on Euronext Lisbon, from 2011 till 2016, is analyzed. The data was collected from the companies' annual consolidated financial reports. The data was analyzed using tree statistical analysis techniques, binary logistic regression, Pearson correlation coefficient, and t-test for independent groups, with SPSS (Statistical package for social sciences). The results show that the variables more relevant to value creation are the operating profit margin ratio, invested capital turnover, and the cost of equity rate. This study provides valuable information that assists managers in their decision-making, allowing to maximize value creation, through the identification of the main value drivers, and it also contributes to the dissemination on the subject of value creation.