Creation of shareholder value : a comparison of economic value added (EVA) with traditional performance measures

Abstract

This study investigates the strength of association of Economic Value Added with Shareholder Value and compares this association to that of traditional performance measures. It examines the correlation between MVA and EVA as well as other indicators over a ten year period in respect of industrial companies listed on the Johannesburg Stock Exchange, and finds that the strongest correlation exists between MVA and EVA. The correlation over the period is however only 0.155 which is weaker than the correlation found by other studies. Earnings per share showed the second strongest correlation at 0.102.