Financial Performance Appraisal Using Economic Values Added in Emerging Markets: Evidence from Egyptian Listed Firms

Abstract

The effectiveness of conventional accounting methods used for firm financial performance measurement and analysis has been criticized. Theorists started to put forward modern financial performance measures although their significance is still under examination by the researchers. Therefore, this study aims to investigate the impact of three contemporary economic based measures; economic value added (EVA), refined economic value added (REVA) and economic value added momentum (EVA Momentum) on firm financial performance in addition to finding out the economic value added based measure with the highest explanatory power relevant to firm financial performance via conducting relative and incremental information content analyses. Data were collected for companies listed in the Egyptian Stock Exchange over the period 2010-2019 excluding the financial sector. Generalized Least Squares (GLS) regression is conducted using the statistical package of EViews-version 10. The results showed significant impact of all the economic value added measures on firm financial performance. In addition, it was found that REVA could be considered as the most effective economic measure in improving and explaining the financial performance.