Economic value-added in the Malaysian listed companies: a preliminary evidence

Abstract

This study examines the nature and characteristics of Economic Value-Added (EVA) in 100 largest non-financial companies listed on the Malaysian stock exchange, and to assess its impact on stock value. The evidence suggests that, in general, the EVA has a superior influence over firms' market values compared to the traditional accounting measures such as the earnings per share. Its superiority becomes more apparent when regression tests are conducted separately for companies with positive EVA (value creators) and those with negative EVA (value destroyers). There is a strong positive relationship between EVA and market values for value creators, while the relationship is negative for value destroyers. The negative relationship for value destroyers is inconsistent with expectations and may be sample and period specific.