The importance of stock returns and Economic Value-Added (EVA) have attracted various research scholars over the past several years. The present study is an analytical attempt to critically evaluate the relationship between stock returns and EVA. The study considers a sample of 50 companies listed on the National Stock Exchange (NSE) of India for the period of five years, i.e., 2012-2016. Along with EVA, other traditional measures analyzed include Return on Equity (ROE), Return on Asset (ROA), Dividend per Share (DPS) and Earnings per Share (EPS). Statistical techniques like Karl Pearson’s correlation matrix, regression analysis using ordinary least square model and Granger causality test have been implemented to prove the results. The results indicate a positive relationship of stock returns with EVA and the traditional measures of performance measurement. But the study did not find any evidence indicating significant impact of these variables on the stock returns. Also, it was found that EVACE, ROA and ROE do Granger cause stock returns.

The technique of Economic Value-Added (EVA) as developed by Stern Steward and Co. has gained considerable significance in finance and accounting research. Various researchers have proved EVA to be a superior performance measurement technique as compared to the traditional measures like Return on Invested Capital (ROIC), Return on Equity (ROE), Return on Asset (ROA) and so on. EVA in simple terms means how much the company earns over and above the cost of capital. From the shareholders’ point of view, EVA reflects how the value has been created for their investment. A significant amount of research has been done analyzing the association between EVA and the traditional measures. Poornima et al. (2015) conducted such a study where the researchers evidenced the impact of one of the traditional measures, ROIC on the EVA. The study also revealed a significant relationship of EVA with the traditional measures Earnings per Share (EPS) and Return on Net Worth (RONW). As the research areas in social science are dynamic in nature, many researchers tried to relate EVA with various other factors. One of such key variables is stock returns. Every investor is keen to know how well the stocks perform in which they have invested their funds. Also, they are keen to know whether the companies in which they have invested are performing well or not. Thus, it becomes evident to critically evaluate the association of stock returns and EVA. Sharma and Kumar (2010) performed an extensive content analysis on EVA which identified various gaps in the existing literature. The researchers presented a narrative review of 112 research papers. They indicated that the concept of EVA has gained more attention in the advanced economies. Shareholder wealth creation is one more crucial aspect of EVA.

Accounting Research and Audit Practices, The Impact of EVA and Traditional Accounting, Performance Measures on Stock Returns.