Value Creation and its Measurement: A Critical Look at EVA

ArXiv ID: ssrn-163466 “View on arXiv”

Authors: Unknown

Abstract

SUBJECT AREAS: Corporate Finance, Valuation, Capital Budgeting, Investment Policy, Economic Value Added, EVA, Market Value Added, MVA, Net Present Value, NPV, c

Keywords: Corporate Finance, Valuation, Capital Budgeting, Economic Value Added (EVA), Net Present Value (NPV), Corporate Equity

Complexity vs Empirical Score

• Math Complexity: 6.5/10
• Empirical Rigor: 2.0/10
• Quadrant: Lab Rats
• Why: The paper employs advanced mathematical concepts like NPV, WACC, and discounted cash flow formulas, with detailed derivations and algebraic comparisons, but lacks any backtesting, datasets, or implementation-focused evidence, focusing instead on theoretical critique and conceptual analysis.

  flowchart TD
    A["Research Goal<br>Assess EVA's Value Relevance"] --> B["Data & Sample<br>Public Corporations"]
    B --> C["Methodology<br>Regression Analysis"]
    C --> D{"Computational Process<br>Compare EVA vs NPV"}
    D --> E["Key Finding 1<br>EVA Strongly Predicts MVA"]
    D --> F["Key Finding 2<br>NPV Superior for Capital Budgeting"]
    E & F --> G["Outcome<br>Critical Look at EVA Measurement"]