Economic value added (EVA) and other accounting performance indicator: An empirical analysis of Indian automobile industry

The growth of Indian capital market has increased the pressure on the companies to consistently perform better. Corporate performance is affected by various factors ranging from company specific, industry specific and economic variables. According to Rappaaport(1986), there are seven drivers such as sales growth rate, operating profit margin, income-tax rate, working capital investment, fixed capital investment, cost of capital and forecast duration that can be managed to create value. Traditionally, periodic corporate performance is most often measured using some traditional accounting measures such as EPS,ROCE,RONW, capital productivity and labour productivity. Among the set of popular Value Based Management system, Economic Value Added(EVA) is the prominent. This study examine whether EVA has got a better predictive power relative to the traditional accounting measures such as EPS, ROCM, RONW, capital productivity and labour productivity. The study supports the claim that the EVA is the better predictor of market value compared to other accounting measures.