Is Economic Value Added Momentum (EVA Momentum) a Better Performance Measurement Tool? Evidence from Egyptian Listed Firms

Abstract

In 1991, Stewart launched the theory of economic value added (EVA) as a modern measure of financial performance assuring its ability in analyzing and improving the firm performance. Later on, in 2009, he introduced the economic value added momentum (EVA Momentum) as the single best firm financial performance measurement tool. Therefore, this study has the purpose of investigating the impact of EVA and EVA Momentum on firm financial performance indicators; return on assets (ROA) and return on equity (ROE) using Generalized Least Squares (GLS) regression. This paper is also aiming to contribute into announcing the economic value added measure with the highest explanatory power relevant to firm financial performance via conducting relative information content analysis along with Stepwise regression. Data were collected for companies listed in the Egyptian Stock Exchange over the period 2010-2019 excluding the financial sector. Statistical techniques are conducted using the statistical package of EViews-version 10. The results showed significant impact for both economic values added on firm financial performance, except for EVA with ROE. In addition, it was found that EVA Momentum could be considered as the most effective economic measure in improving and explaining the financial performance.