Australian Evidence Concerning the Information Content of Economic Value-Added
Year: 2004
Type: article
Abstract: Pooled time-series, cross-sectional data on 110 Australian companies over the period 1992–1998 is employed to examine whether the trademarked variant of residual income known as economic value-added (EVA®) is more highly associated with stock returns than other commonly-used accounting-based measures. These other measures of internal and external performance include earnings, net cash flow and residual income. Three alternative formulations for pooling data are also employed in the analysis, namely, the common-effects, fixed-effects and random-effects models, with the fixed-effects approach found to be the most empirically appropriate. Relative information content tests reveal returns to be more closely associated with EVA® than residual income, earnings and net cash flow, respectively. An analysis of the components of EVA® confirms that the GAAP-related adjustments most closely associated with EVA® are significant at the margin in explaining stock returns.
Source: Australian Journal of Management
Authors: Andrew C. Worthington, Tracey West
Institutions: Griffith University, Queensland University of Technology
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: green
Funder: University of Technology Sydney
OpenAlex ID: W2033212252