Mandeep Kaur1 and Sweety Narang2
Department of Commerce and Business Management, Guru Nanak Dev University,
Amritsar - 143005, Punjab, India
1E-mail:, 2E-mail:


Analyzing a sample of 104 companies from the list of BT-India’s most valuable companies, for a period of twelve years from 1996 to 2007, the study empirically tests the hypothesis that value based measures as well as traditional performance measures have equal relative information content i.e. equal association with MVA, a surrogate of shareholder value creation. Using the tools of Univariate Regression Analysis, Multivariate Regression Analysis and various test-statistics, the present study reveals that market seems more focused on ‘Profits’ than value based measure Economic Value Added (EVA). As far as Univariate analysis is concerned, the evidence suggests that although EVA and PAT both depict highly positive and significant association with MVA yet PAT’s explanatory power is as much as twice the explanatory power of EVA. ROCE and ROTA too reflect slightly stronger association with MVA in comparison to EVA. The key findings of the multivariate analysis also confirm the above assertion of Earnings’ superiority to EVA in relative information content test. Finally, the study discusses the potential factors contributing to the failure of EVA to dominate Earnings in explaining the variations in shareholder value creation.

Keywords: Relative Information Content, Shareholder Value Creation, EVA, Traditional Performance Measures, Earnings Myopia.