Does eva beat earnings? A literature review of the evidence since biddle et al. (1997)

Research output: Journal contributionsJournal articlesResearchpeer-review

Authors

17 years ago, Biddle et al. (1997) demonstrated that sophisticated residual income-based figures are not as superior to traditional accounting-based performance measures in tracking shareholder value as consulting firms have claimed. During these 17 years, the intensive discussion of which type of measure tracks shareholder value creation the best continued, both from a theoretical and a practical perspective. This article compares the new findings from advanced research between 1997 and 2014 to assess the ongoing validity of Biddle et al.’s (1997) conclusions. We separate articles into two groups: the ones that find accounting-based performance measure to perform best, and the ones who speak in favor of residual income-based performance measures. In order to do this, we have scanned 618 articles that relate to the findings of Biddle et al. (1997) and analyze the 21 articles that actually contributed new evidence. We find that the conceptual discussion still favors management control systems based on the more sophisticated residual income-based measures. Yet empirically, the vast majority of new studies with advanced research designs still find that accounting numbers are by no means inferior in measuring shareholder value creation.

Original languageEnglish
JournalCorporate Ownership & Control
Volume12
Issue number3
Pages (from-to)8-18
Number of pages11
ISSN1727-9232
DOIs
Publication statusPublished - 01.03.2015
Externally publishedYes

    Research areas

  • Accounting-based performance measures, Boston consulting group, Consulting, Economic value added, EVA, Literature review, Management control, McKinsey, Residual income-based performance measures, Shareholder value, Stern stewart, Total shareholder return
  • Management studies

DOI