The MVA‐EVA Relationship: Separation of Market Driven Versus Firm Driven Effects

Janis K. Zaima (Professor of Finance)
Howard F. Turetsky (Associate Professor of Accounting, San Jose State University, College of Business, Accounting & Finance Dept., BT850, San Jose, CA 95192‐0066)
Bruce Cochran (Program Manager, Cisco Systems, Inc., 170 West Tasman Drive, San Jose, CA 95134)

Review of Accounting and Finance

ISSN: 1475-7702

Publication date: 1 January 2005

Abstract

Studies that examine the relationship of economic value added (EVA) to market value did not isolate the EVA effect in conjunction with controlling for the economic effect of the market. Since the EVA metric is viewed as value‐added apart from the market, operational managers will benefit from a procedure that separates the market driven versus firm driven (EVA) effects. Our paper examines the effects of the economy and EVA on MVA. The results indicate that EVA and GDP significantly affect MVA. Furthermore, the MVA‐EVA relationship shows a systematic bias between the largest MVA firms and the smallest MVA firms. Overall, our study provides implications for corporate executives utilizing EVA to evaluate managerial performance linked to MVA.

Keywords

Citation

Zaima, J.K., Turetsky, H.F. and Cochran, B. (2005), "The MVA‐EVA Relationship: Separation of Market Driven Versus Firm Driven Effects", Review of Accounting and Finance, Vol. 4 No. 1, pp. 32-49. https://doi.org/10.1108/eb043417

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Publisher

:

Emerald Group Publishing Limited

Copyright © 2005, Emerald Group Publishing Limited

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