Download or read book EVA as a Measure for Shareholder Value and Executive Compensation A Critical View written by Stephan Pietge and published by GRIN Verlag. This book was released on 2007-07-29 with total page 93 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bachelor Thesis from the year 2003 in the subject Business economics - Investment and Finance, grade: 1.0 (A), Edinburgh Napier University (Business School), 200 entries in the bibliography, language: English, abstract: For several decades academics have been looking for an efficient performance measure, which not only reflects the effectiveness and efficiency of the firm, but also aligns manager′s and shareholder′s interests. Even though many studies question the merit of a single measure for overall firm performance, Stern and Stewart claim to have solved the puzzle with a method labeled Economic Value Added (EVA). This paper examines two aspects: First, EVA′s predicting power regarding stock returns and second, its impact on management behavior as an element of executive compensation. At first glance, Stern and Stewart seem to be right. During the early 1990s their approach gained tremendous popularity, reflected by dozens of anecdotal success stories. Though EVA′s demand of integrating a total capital charge is appealing, the concept is by no means new. The framework of residual income (economic profit), which has been around for decades, also requires a charge for equity capital. Further, some scholars criticize the use of accounting adjustments in order to calculate EVA and its ability to capture performance at the divisional level. So far there is no independent empirical evidence that EVA is superior to accounting measures in predicting stock returns. Some studies even question EVA′s incremental value regarding executive compensation by stating that economic profit is doing as good a job. Consequently, it is tempting to doubt that Economic Value Added indeed adds any value.
Download or read book EVA as the Best Financial Performance Measure the Theory of Reality written by Alina Ignatiuk and published by GRIN Verlag. This book was released on 2009-04 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2008 in the subject Business economics - Business Management, Corporate Governance, grade: A, St. Mary's University San Antonio, Texas, language: English, abstract: In this paper these issues will be discussed: -the main purpose and functions of the financial performance management and how it is related to the problem of shareholders value creation, company growth and managers decision making process and management motivation; -the appropriate measures of management performance from the shareholders point of view; -contradictions or goal incongruence between shareholders, management and company long-term growth.
Download or read book Best Practice EVA written by Bennett Stewart and published by John Wiley & Sons. This book was released on 2013-02-19 with total page 357 pages. Available in PDF, EPUB and Kindle. Book excerpt: Best-Practice EVA tells the new EVA story from the ground up. Stewart covers EVA essentials—the classic economic profit version of EVA—in the first three chapters of the book. He shows readers how simple and intuitive EVA really is, how it is defined, and why it is better than all other measures of corporate profit. You discover how it naturally guides managers into making all the right decisions—the ones that will truly maximize value. You see how to use it in profit-sharing bonus plans that create the powerful incentives of an owner. Later, Stewart introduces new ratios that make EVA much more powerful and much easier to use than ever before. The pinnacle of the new ratio framework is EVA Momentum, calculated by taking the change in EVA versus the prior period, and dividing by the revenues in the prior period. It measures the growth rate in EVA, scaled to the sales size of the business. It is the only corporate performance ratio where bigger always is better, because it gets bigger when EVA does, which means it should be every company's most important financial goal, the one ratio metric that everyone aims to maximize as the key measure of corporate success. Stewart then walks through the nuts and bolts of Best-Practice EVA, kicking off with an in-depth look at EVA Margin, or EVA as a percent of sales. It’s a key productivity metric, and Stewart’s candidate to replace ROI. The last link in the Best-Practice program is PRVit—the EVA market score report. Stewart shows how to read and interpret the report, how the score is determined, and why investors are turning to it to screen and rate stocks. He also shows why it is finding a home with CFOs and IR directors who want insights into how the market is pricing their stock. The book concludes with battle-tested tips from the firing line, practical suggestions for how you can test drive and adopt Best-Practice EVA at your company.
Download or read book The EVA Challenge written by Joel M. Stern and published by John Wiley & Sons. This book was released on 2003-12-22 with total page 260 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economic Value Added - das EVA-Konzept - wurde von der Beratungsfirma Stern Stewart & Co. entwickelt. Es ist ein effektiver Maßstab zur Messung der finanziellen Performance eines Unternehmens und ist eng mit dem Shareholder-Value-Ansatz verbunden. Darüber hinaus kann mit Hilfe von EVA -Berechnungen auch eine Unternehmensbewertung durchgeführt werden; ein positiver EVA-Wert bedeutet einen Wertzuwachs, ein negativer hingegen einen Wertverlust. "The EVA Challenge" erläutert, wie man EVA implementiert - angefangen bei der Schulung von Angestellten bis hin zur Beantwortung und Lösung der häufigsten Implementierungsfragen und -probleme, denen Unternehmen begegnen. Diskutiert wird komplett neues Material zu 'real options', 'leveraged stock options' und anderen wichtigen Finanzkonzepte für Unternehmen der New und der Old Economy. Mit zahlreichen Fallbeispielen aus der Unternehmenspraxis.
Download or read book Economic Value Added EVA Drivers and Leverages written by Dirian El Amine and published by GRIN Verlag. This book was released on 2013-04-10 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: Project Report from the year 2011 in the subject Business economics - Business Management, Corporate Governance, grade: 1,5, University of Cooperative Education Stuttgart; Horb, language: English, abstract: From the contemporary dominance of the shareholder value approach arises more and more the necessity to precisely detect its performance as shareholder value is broadly seen as a significant indicator determining a company’s success or failure. However, measuring the performance of a company’s shareholder value can be very challenging. Hence, the purpose of this paper is to deal with a well-known approach that enables businesses to detect its shareholder value performance: Economic Value Added (EVA). The thesis discusses the correlation between EVA and shareholder value, it further outlines its main drivers. In the second part, the paper elaborates on the specific links of the EVA approach to a regional Sales department and identifies the department’s main leverages on EVA. In order to detect the influence of the main operative decisions on EVA, the thesis introduces the key figure Effect-on-EVA. The applicability of Effect-on-EVA is shown in a model calculation. Above all, this project thesis shall create a profound practical value by sharpening the awareness of how to influence EVA in a positive way. In order to meet the recommended scope, the paper does not elaborate Asset Management, Accounts Receivable Management and Incentive Compensation in detail, but strives to point out the respective links to EVA.
Download or read book EVA and Value Based Management A Practical Guide to Implementation written by S. Young and published by McGraw-Hill Education. This book was released on 2000-11-22 with total page 493 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economic Value Added (EVA) and Value Based Management (VBM) are today’s hottest management buzzwords. But written information has often been biased and clouded by the authors’ hidden agendas. EVA and Value-Based Management is the first book to unflinchingly discuss the pros and cons of EVA and VBM. Covering both implementation and conceptual issues, with a strong emphasis on performance measurement, value drivers, and management compensation, it allows readers to come to their own informed conclusions.
Download or read book A Shareholder Value and Agency Theory Based Compensation System written by Arne Wolter and published by GRIN Verlag. This book was released on 2002-01-24 with total page 92 pages. Available in PDF, EPUB and Kindle. Book excerpt: Diploma Thesis from the year 2000 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,0 (A), Technical University of Braunschweig (Department of Accounting/College of Business Administration), language: English, abstract: "The fundamental goal of all business is to maximize shareholder value." This statement has become commonplace not only in corporate America, but it is also the imperative statement of business around the world. A failure to seek to maximize shareholder value results in pressure from the board of directors and activist shareholders. The takeover movement of the latter half of the 1980s provided another powerful incentive for managers to focus on creating value. This is grounded on the fact that the only compelling takeover defense is to deliver superior shareholder value. Given the globalization of capital markets and their diminishing boundaries, economic systems will slowly run out of capital, if they are unable to create shareholder wealth and thereby attract investors. If economic systems are unable to provide superior or at least satisfying returns they will fall further and further behind in global competition and will lose employment opportunities. Thus, a value-based system grows in importance as capital becomes more mobile. Although shareholder value metrics and value-based management are widely known they are far from being universally applied. Years of restructuring and employee layoffs frequently attributed to shareholder value considerations coupled with self-interested management and shortsighted focus on current stock price has promoted frustration and uncertainty. Thus, it is critical to fully understand the shareholder value approach and its variants. Additionally, it is vital for the shareholder value approach that the objectives of the mangers and the company′s shareholders are aligned and focused on delivering superior shareholder value. The relationship between manager and stockholder can best be examined by the agency theory that studies the contract between agents (e.g. managers) and principals (e.g. stockholders).3 An overview of a holistic shareholder value and agency based compensation system is the topic of this paper.
Download or read book EVA and Value Based Management A Practical Guide to Implementation written by S. David Young and published by McGraw Hill Professional. This book was released on 2000-12-13 with total page 520 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economic Value Added (EVA) and Value Based Management (VBM) are today’s hottest management buzzwords. But written information has often been biased and clouded by the authors’ hidden agendas. EVA and Value-Based Management is the first book to unflinchingly discuss the pros and cons of EVA and VBM. Covering both implementation and conceptual issues, with a strong emphasis on performance measurement, value drivers, and management compensation, it allows readers to come to their own informed conclusions.
Download or read book Economic Value Added written by CMA(Dr.) Ashok Panigrahi and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The Economic Value Added (EVA) is the difference between the firm's after-tax return on capital and its cost of capital. It has received a good amount of interest in recent years.Description - Traditional approaches for measuring "Shareholders' Value Creation" have used parameters such as earnings capitalization, market capitalization and the present value of estimated future cash flows. Extensive equity research has now established that it is not earnings per se, but Value which is important. A new measure called "Economic Value Added" (EVA), developed by Stern Stewart & Company, is increasingly being applied to understand and evaluate financial performance. In its simplest form, the EVA is the difference between the firm's after-tax return on capital and its cost of capital.EVA has received a good amount of interest in recent years. The main distinction between EVA and Net Profits, as reported in the P&L statement, is that "Net Profits" does not make an adjustment for the equity capital used. So a company, while making accounting profits, might still be destroying value from a shareholder perspective when the returns are lower in relation to the capital used. By incorporating the cost of equity, EVA claims to measure the amount by which profits exceed or fall short of the capital.
Download or read book Creation of Shareholder Value by Application of Eva written by Anne-Kristin Rademacher and published by . This book was released on 2013-05 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: Scholarly Research Paper from the year 2012 in the subject Business economics - Controlling, printed single-sided, grade: 1,7, University of Applied Sciences Essen, language: English, abstract: Creation of shareholder value; this simple idea has become a principle of corporate governance over the past fifty years (Lazonick et al, 2000). Managers shall maximize the value of their business by efficiently allocating resources and hence increase the wealth of shareholders (Worthington et al, 2001). The operationalization of this objective is done by various indicators. Shareholders, managers and other interested parties strongly follow these in order to assess business and predict future performance. EVA is one of these indicators. The following paper presents the concept and measurement behind the trademark EVA. It is practically applied for the company Fresenius in a simplified way. Theoretical and practical analyses reveal strengths and weaknesses of measurement and concept. In general it can be said that EVA is one approach to identify value creation and degrading. The concept can be used for investment decisions as well as performance appraisal. Main disadvantage has been identified to be a high degree of complexity in order to derive the true EVA. If adjustments are not made the measurement appears to be similar to other residual income indicators.
Download or read book An Examination of Economic Value Added and Executive Compensation written by John P. Evans and published by . This book was released on 2010 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: Despite a growing literature, the relationship between the structure of executive compensation and firm performance is not fully understood. Furthermore, little work has been done on the link between Economic Value Added (EVA) as a measure of firm performance and the form of executive compensation. An examination of the compensation structure and economic value added of 209 companies in 1995 - 1998 provides evidence supporting incentive compensation. Economic Value Added is found to be positively and significantly related to incentive based compensation. Cash based remuneration, was found to be unrelated to EVA performance.
Download or read book Creating Shareholder Value written by Alfred Rappaport and published by Simon and Schuster. This book was released on 1999-10-13 with total page 225 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economist, consultant, and Wall Street Journal contributor Alfred Rappaport provides managers and investors with the practical tools and tests for a corporate strategy that creates shareholder value. The ultimate test of corporate strategy, the only reliable measure, is whether it creates economic value for shareholders. After a decade of downsizings frequently blamed on shareholder value decision making, this book presents a new and indepth assessment of the rationale for shareholder value. Further, Rappaport presents provocative new insights on shareholder value applications to: (1) business planning, (2) performance evaluation, (3) executive compensation, (4) mergers and acquisitions, (5) interpreting stock market signals, and (6) organizational implementation. Readers will be particularly interested in Rappaport's answers to three management performance evaluation questions: (1) What is the most appropriate measure of performance? (2) What is the most appropriate target level of performance? and (3) How should rewards be linked to performance? Through the lens of high-stakes case studies, like the notable acquisition of Duracell International by Gillette, Rappaport dissects the intricate decisions and risks inherent in the merger and acquisition process. The shareholder value approach presented here has been widely embraced by publicly traded as well as privately held companies worldwide. Brilliant and incisive, this is the one book that should be required reading for managers and investors who want to stay on the cutting edge of success in a highly competitive global economy.
Download or read book Financial Performance Measures and Value Creation the State of the Art written by Daniela Venanzi and published by Springer Science & Business Media. This book was released on 2011-12-01 with total page 81 pages. Available in PDF, EPUB and Kindle. Book excerpt: The choice of financial performance measures is one of the most critical challenges facing organizations. The accounting-based measures of financial performance have been viewed as inadequate, as firms began focusing on shareholder value as the primary long-term objective of the organization. Hence, value-based metrics were devised that explicitly incorporate the cost of capital into performance calculations. Despite the increasing emphasis on these value-based measures, no definitive evidence exists of which metric works better than others, and on the extent to which any of them is superior to traditional accounting measures. In this scenario, the objective of this book is contributing to the ongoing dialogue on the appropriateness of different financial performance measures, by providing a systematic and updated review of the major value-based measures, by highlighting their respective strengths and weaknesses and by comparing the main international empirical evidence on their effectiveness. This book can be a powerful tool for guiding managers and graduate students in the “tangled forest” of the existing metrics, by providing them with the quick, but adequate knowledge for consistently adopting them.
Download or read book EVA written by Al Ehrbar and published by John Wiley & Sons. This book was released on 1998-10-15 with total page 264 pages. Available in PDF, EPUB and Kindle. Book excerpt: EVA ("economic value added" - wirtschaftliche Wertschöpfung) ist eine Maßeinheit zur Ermittlung des echten Finanzergebnisses eines Unternehmens und eine Strategie zur Schaffung von Unternehmens- und Aktionärsvermögen. Das EVA-Prinzip besagt, daß ein Unternehmen kein Vermögen schafft, solange es nicht in der Lage ist, Gewinne einzufahren, die höher sind als die Kapitalkosten. EVA ist auch eine Methode, die Prioritäten innerhalb eines Unternehmens so zu gewichten, daß das Hauptaugenmerk auf der Schaffung von Vermögen liegt, und zwar zum Nutzen aller. Leicht verständlich geschrieben, mit zahlreichen Fallbeispielen bekannter Firmen und einem Minimum an Gleichungen und Finanzjargon. (11/98)
Download or read book Foundations of Economic Value Added written by James L. Grant and published by John Wiley & Sons. This book was released on 2003-05-05 with total page 342 pages. Available in PDF, EPUB and Kindle. Book excerpt: An updated look at the role of economic profit analysis in the process of wealth creation Grant explains the pivotal role of economic value added (EVA) in the theory of finance, how to measure EVA with standard accounting adjustments, how to use EVA to value companies and their stock, and how to use economic profit principles to identify wealth-creating firms, industries, and even market economies.
Download or read book The Quest for Value written by G. Bennett Stewart and published by Harper Collins. This book was released on 1991-02-12 with total page 826 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this bestselling classic of financial management, G. Bennett Stewart, III, raises and answers these provocative questions: Do dividends matter? Are earnings per share really accurate measures of corporate performance? What is the engine that really drives share prices? More than that, Stewart lays the foundation for EVAr, the financial management and incentive system now in place at nearly 300 companies around the world, and which is rapidly becoming the global standard for corporate governance. Managers, confused about what investors really want, often find it difficult to reach informed decisions regarding business strategy, acquisitions and divestitures, financial structure, dividend policy, and executive compensation. But now an EVAr -based revolution is providing a practical framework that managers can use to build a premium-valued company. At the forefront of this revolution is the consulting firm of Stern Stewart & Co., of which G. Bennett Stewart, III, author of The Quest for Value, is senior partner and cofounder. The Quest for Value is written for senior management, key operating people, and planning and financial staff. This bible of financial management will assist managers in goal setting, resource allocation, strategy development, valuation of acquisitions, financial policy setting, incentive compensation planning, and building shareholder value. The Quest for Value cuts sharply through the myths that to this day misinform corporate strategists in their pursuit of shareholder value. Laying waste to inaccurate yet widely used methods of performance, Stewart demonstrates how the Stern Stewart EVAr approach not only creates greater shareholder value but also provides a powerful framework for the broadest range of corporate decision making.
Download or read book Financial Markets and Corporate Strategy written by David Hillier and published by McGraw-Hill Education. This book was released on 2011-10 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The second European edition of Financial Markets and Corporate Strategy provides comprehensive coverage of financial markets and corporate finance, brought to life by real world examples, cases and insights. Placed in a truly international context, this new and updated edition takes an academic and practical view-point to guide students through the challenges of studying and practicing finance. Aimed specifically at an international audience, this edition boasts hundreds of references to new and relevant non-US research papers from top finance journals. Whilst retaining the well respected structure of the successful US text, Professor David Hillier has also made a number of additions which include: Fully updated research, data and examples in every chapter. Coverage of the global financial crisis, the impact it made on the financial markets and the lessons being learnt by the finance industry. A stronger emphasis on corporate governance and agency theory. Updates on accounting standards, bankruptcy laws, tax rules and tax systems.
