TY - JOUR
T1 - The search for the best financial performance measure
AU - Bacidore, Jeffrey M.
AU - Boquist, John A.
AU - Milbourn, Todd T.
AU - Thakor, Anjan V.
PY - 1997
Y1 - 1997
N2 - Refined economic value added (REVA) provides an analytical framework for evaluating operating performance measures in the context of shareholder value creation. Economic value added (EVA) performs quite well in terms of its correlation with shareholder value creation, but REVA is a theoretically superior measure for assessing whether a firm's operating performance is adequate from the standpoint of compensating the firm's financiers for the risk to their capital. In this article, comprehensive statistical analysis of both REVA and EVA is used to estimate their correlation with and their ability to predict shareholder value creation. REVA statistically outperforms EVA in this regard. Moreover, the realized returns for the 1988-92 period for the top 25 REVA firms were higher than the realized returns for the top 25 EV A firms.
AB - Refined economic value added (REVA) provides an analytical framework for evaluating operating performance measures in the context of shareholder value creation. Economic value added (EVA) performs quite well in terms of its correlation with shareholder value creation, but REVA is a theoretically superior measure for assessing whether a firm's operating performance is adequate from the standpoint of compensating the firm's financiers for the risk to their capital. In this article, comprehensive statistical analysis of both REVA and EVA is used to estimate their correlation with and their ability to predict shareholder value creation. REVA statistically outperforms EVA in this regard. Moreover, the realized returns for the 1988-92 period for the top 25 REVA firms were higher than the realized returns for the top 25 EV A firms.
UR - https://www.scopus.com/pages/publications/0010085553
U2 - 10.2469/faj.v53.n3.2081
DO - 10.2469/faj.v53.n3.2081
M3 - Review article
AN - SCOPUS:0010085553
SN - 0015-198X
VL - 53
SP - 11
EP - 20
JO - Financial Analysts Journal
JF - Financial Analysts Journal
IS - 3
ER -