Assistant Professor in Finance at
The purpose of this paper is to look into the claim of economic value added (EVA) proponents regarding superiority of EVA over eight popular traditional financial performance measures with reference to the Indian pharmaceutical industry from 2002–03 to 2013–14 for 888 firm-year observations. The present research is primarily based on secondary financial data acquired from the prowess database. Multiple regression model (OLS) is used to select the best predictor out of select independent variables to predict the dependent variable and it is found that PAT is having more explanatory power than other independent variables in relationship with MVA. Further, Discriminant analysis is also applied on the average data of twelve years to advise the potential investors to set up a function to screen value creating companies from value destroying companies of the Indian pharmaceutical industry. Results of Discriminant analysis reveals that 9 (30%) pharmaceutical companies out of the grouped 30 sample pharmaceutical companies are scoring less than the average MVA of the industry that means these companies may be considered as value destroying companies.
EVA, MVA, Traditional Performance Measures, Multiple Regression analysis, Discriminant Analysis
