Shareholder value maximization has become the predominant goal of corporations in India and the world over. This goal has gained further importance and focus in the recent years because of the demands made by financial institutional investors, financial markets and competitors on companies to perform and work towards continuous sustainable growth in shareholders' value. To achieve such goals, it is important for companies to device performance measures that are aligned towards the corporate goal of shareholder value enhancement. Many consulting firms have come up with different measures of performance such as Economic Value Added (EVA), cash flow return on investment, and Total Shareholder Return (TSR) to cater to the above need. Of these measures, EVA has become popular in India. The proponents of EVA, Stern Stewart and Co., claim that EVA is superior to other metrics, as it is the financial performance measure that comes closer than any other measure, in capturing the true economic profit of an enterprise, helps managers to make better decisions and motivates them to perform better. A plethora of academic research studies verifying the claims of the proponents have been conducted. The objective of this paper is to present different performance measures available, classify empirical studies carried out on EVA, focus on studies that evaluate the superiority of EVA over other measures, its utility and application, present their findings, and examine the possible reasons for inconsistency in the findings, methodology adopted for study and suggest avenues for future research in this area. This is done through a review of literature of the past two decades.

The success of a business depends on how well the management of the company is able to plan, direct resources from less productive to more productive investments, enhance productivity, take informed decisions, innovate and lead the company towards achievement of its goals. During the last few decades, globalization and intense competition, combined with the growth of capital markets and shareholder activism, forced several corporations to adopt shareholder value maximization as their goal and work continuously towards shareholder value enhancement. Traditional accounting based measures of value, such as profit margin and earnings per share, cease to be relevant under the changing conditions as they fail to take into account the factors that drive shareholder value. Contributors of capital to a given risky venture expect returns which are equal to the opportunity cost of such capital. Capital markets measure value by discounting the expected future cash flows at a rate that the investors expect to get if they invest in companies with similar risks. Hence, a company that reports accounting profits need not necessarily be a value creator from the perspective of a shareholder (Drucker, 1998). Further, the traditional bonus system also failed to link up with value correctly.

This resulted in too small incentives for good performers and too big compensation for mediocre performers (Jensen and Murphy, 1990). Thus, the need to measure and manage value in a manner consistent with the way owners and other stakeholders measure value was felt by the top management. It became essential for managements not only to understand the process of value creation but also to create tangible links between their strategies and value creation to facilitate both decision making and performance measurement. To meet this need, a novel approach to management known as the Value Based Management (VBM) was innovated. Taggart et al. (1994) first coined the term VBM. They suggested a framework that links the company's strategy to its value in capital markets. They have identified five key institutional value drivers that are essential for sustainable value creation. They are: governance, strategic planning, resource allocation, performance management and top management compensation. The VBM approach uses metrics at different levels that are aligned to the institutional drivers, key functions and processes.

Applied Finance Journal, Financial Markets, Economic Value Added, EVA, Capital Market, Value Based Management, VBM, Performance Management, Net Present Value, NPV, Earnings Before Interest and Taxes, EBIT, Strategic Planning, Decision Making, Capital Asset Pricing Model, CAPM, Corporate Culture.