Asian Journal of Development Matters
  • Year: 2012
  • Volume: 6
  • Issue: 1

EVA as the best financial performance measure: A study of companies listed in tehran stock exchange (TSE)

  • Author:
  • Ali Reza Modanlo Joibary1,, N. Nagaraja2
  • Total Page Count: 8
  • Page Number: 73 to 80

1Research Scholar, Department of Studies in commerce, University of Mysore, Mysore, India

2Associate Professor, DOS in Commerce, University of Mysore, India

*Email: ar_modanlo@yahoo.com

Abstract

Stewart proposed economic value added (EVA) as a true measurement of a firm's performance and an executive's evaluation tool because EVA reflects only incremental values added to a firm after considering cost of capital (Stewart, 1991).

This study examines the relationships between economic value added (EVA) and Traditional Accounting Measures on Companies listed in Tehran stock Exchange (TSE).The dependent variable of this study is EVA and independent variables are Return on Assets (ROA), Return on Equity (ROE), Current Ratio (DR), and Current Ratio (CR). The samples of the study are listed companies 180 on Tehran stock exchange (TSE).

The result of research hypotheses analysis shows that there are significant relationship between "EVA-ROA", "EVA-ROE", and "EVA–DR" But there is no significant relationship between EVA and CR.

The results show that can explain 15% of EVA changes with changes in the ROA and 10.2% EVA changes with changes in the ROE.

In this study, ROA with correlation coefficient 0.387, ROE with correlation coefficient 0.319, and DR with correlation coefficient 0.189 have significant relationship with EVA.

This study shows that ROA it has stronger relationship with EVA.

Keywords

Economic Value Added (EVA), Return on Assets (ROA), Return on Equity (ROE), Current Ratio (CR), and Debt Ratio (DR)