The
Main Questions
The study set
out on the understanding that there are inconsistencies between theory and
practice in Economic Value Added (EVA) as a concept in finance (Weaver, 2001).
The research was, therefore, aimed at bridging the gap between theory and
practice by identifying the inconsistencies. In that way, the author also
thought the research would allow for more research into the subject.
Main
Findings
The research
found out that there are significant variations in EVA measurement practices
with different survey respondents indicating variations in measurement
practices. In places where there were some levels of consistency, it mostly
happened within the same industry. It also came out that companies used EVA as
a means of enhancing their performance metrics and even its implementation did
not see those companies stop using other traditional tools of evaluation.
Methodology
The
investigation used a survey research approach. An initial list of 89 EVA
companies was generated. The CFOs of the companies were then asked of their
willingness to participate. Through an
elimination method, the researcher was able to remain with only 29 respondents.
Information from the respondents was obtained by way of questionnaires. In
their answers, respondents furnished their company background and information
as to whether their made certain adjustments.
Limitation
The utility of
the study is limited in several respects. For one, the study had a relatively
low level of participation from private companies. This makes it less likely
for the findings to apply to such companies. Even when it used information from
public companies, it was difficult to get information regarding non-reported
divisions of those companies. Lastly, the companies under survey used different
measurements methods limiting the utility of any comparisons.
Conclusion
The research
concludes by noting the level of interest displayed towards the study. Further
identifies the focus of a future follow-up analysis which should focus on a
number of issues such as the application of EVA as a concept.
Reference
Weaver, S.C. (2001).Measuring
Economic Value Added: A Survey of the Practices
of EVA Proponents. Journal of Applied Finance, 50-60.
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