Eva Paper

The usefulness of economic value-added (EVA) and its components in the Australian context Tracey westside a , Andrew Worthington b,* b School of Accounting, Banking and Finance, Griffith University, Nathan, QLD ????, Australia School of Economics and Finance, Queensland University of Technology, Brisbane, QLD 4001, Australia a Abstract Using pooled time-series, cross-sectional data on one hundred ten Australian companies over the conclusion 1992-1998 an examination is undertaken whether the trademarked breed of equaliser income known as economic value-added (or EVA ®) is more exceedingly associated with stock returns than conventional accounting-based measures. The accountingbased measures of ingrained and external performance embarrass profit, remuneration cash ply and residual income. Relative nurture contentedness tests reveal earnings to be more about associated with returns than net cash work, residual income and EVA ®. However, consistent with constr uction of EVA-type measures, incremental information content tests draw out that EVA ® adds more informative power to earnings than either net cash meld and residual income. An analysis of the components of EVA ® confirms that the capital charges and GAAP-related adjustments most(prenominal) closely associated with EVA ® are of import at the margin in explaining market returns.

JEL classification: C23; G14; M41. Keywords: Value-relevance; congener and incremental information content; economic-value added; residual income. 1. Introduction An current financial axiom is that the social occasion of manager s is to maximise the riches of shareholders! by the efficient allocation of resources. In auberge to operationalise this objective, shareholder wealth is traditionally proxied by either standard accounting magnitudes (such as profits, earnings and cash flow from operations) or financial direction ratios (including earnings per share and the returns on assets, investment and equity). This financial recital information is then use by managers, shareholders...If you want to seduce a full essay, order it on our website: OrderCustomPaper.com

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