EVA as Superior Performance Measurement Tool

Abdullah Al Mamun, Harry Entebang, Shazali Abu Mansor

Faculty of Economics & Business, University Malaysia Sarawak.

DOI: 10.4236/me.2012.33041                

Abstract

Prior to the East Asian financial crisis scholars found the necessity of a true financial performance measure in Malaysia. After more than one decade of the crisis Malaysian firms still stick with the conventional performance measures, which are criticised due to general accepted accounting principles. In this vein, this study aims to study a value based financial performance measure which can be adopted by the Malaysian firms over the conventional measures currently used. Economic Value Added (EVA) was introduced and advocated by Stern Stewart and Co. in 1982. This study intended to identify why EVA should be used as financial performance measure over the conventional measures and any added value or added advantage in EVA compare to conventional methods. EVA has been able to gain attention of the corporate giants like Coca-Cola, Sprint Corporation and Quaker Oats, as it is able to depict the true profitability of the company, however, there have been very little research conducted on EVA in Asian countries including Malaysia.

Keywords

Performance Measurement Tool; Economic Value Added (EVA); Value Based Measurement Tool; Malaysia; Conventional Measurement Tool

Conflicts of Interest

The authors declare no conflicts of interest.

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