Empirical Examination of Traditional Accounting Measures and EVA: A Study of Financial Experts in India

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Mengi, Tania ; Bhatia, Dr. B S (2014)
  • Publisher: Journal Of Business Management & Social Sciences Research
  • Journal: Journal Of Business Management & Social Sciences Research (issn: 2319-5614, eissn: 2319-5614)
  • Subject: Business Management; Financial Management | Market Value Added (MVA), Economic Value Added (EVA), Traditional Accounting Measures, Financial experts, Investment Strategy

Increased awareness among the investors has forced the companies to focus on shareholder wealth maximization. This has generated the need to have performance measurement tool which would help to know whether value has been created or destroyed. So the present study tries to explore the perception of experts/knowledgeable persons in the field of finance regarding the use of traditional measures and EVA as predictors of MVA. The study also examines the factors that affect the investment strategy of the respondents. The study divides the respondents into three groups namely; respondents preferring both traditional accounting measures & EVA, respondents preferring only traditional accounting measures and respondents preferring only EVA. The results state that the respondents rely more on fundamental analysis and technical analysis in comparison to other sources of information for predicting MVA of the company. The study confirms the importance of EVA but at the same time also highlights that EVA calculation is difficult and complicated as it involves a number of adjustments. Hence significant attention needs to be paid to EVA disclosure practices in the Indian corporate sector.
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