Economic value added fails to boost shareholder value, study finds.
The article looks at a method called economic value added (EVA) and how it compares to other financial measures like earnings and cash flow. It found that earnings before extraordinary items (EBEI) is most closely related to stock returns. EVA users made certain financial decisions, but the market didn't react strongly. Overall, EVA might align management incentives with shareholders' interests, but it doesn't always increase shareholder value.