| Research is sparse and the conclusions varied in the realm of the correlation of Economic Value Added (EVA) with changes in the market value of companies. EVA, a measure developed and trademarked by Stern Stewart consulting firm, is net income (traditional accounting income) with adjustments made to it to reflect certain non-cash transactions and the cost of capital. Traditional financial statements are used to ensure compliance requirements and as a yardstick for investors to compare prospective investments in various companies. This thesis performs statistical analyses on EVA and changes in market value of fortune 1,000 businesses, individually and grouped by industry, and examines the correlation between these variables. It is found that there is a correlation between EVA and changes in the market value of companies and that changes in EVA explain a greater amount of the change in market value when the companies are grouped by their industry. |
