Pursuing shareholder value : comparing the information content of EVA and accounting earnings

Green, Brendan Richard

Pursuing shareholder value : comparing the information content of EVA and accounting earnings

Master Thesis

2000

Publisher

University of Cape Town

Department

College of Accounting

Faculty

Faculty of Commerce

Abstract

This study provides independent empirical evidence of the strength of the relationship between changes in shareholder value and various financial measures of corporate performance. The objective is to assess whether adopting the goal of maximising EV A, instead of accounting earnings, enables management to more effectively pursue shareholder value. Firstly, the ability of EVA and accounting earnings to explain contemporaneous annual share returns is assessed. This relative information content issue is tested on a sample of 758 company year-ends from 1991 to 1997. Results indicate that accounting earnings explains 26% of the variation in cumulative abnormal returns. The comparative figure for EVA is less than 12%. This suggests that accounting earnings tends to dominate EV A in its association with share returns.

Description

Bibliography: leaves 82-85.

Keywords

Accounting

Reference:

Collections

Masters

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