IIMS Journal of Management Science

‘EVA’ As an Indicator of Shareholders’ Wealth Maximisation in Construction Industry: A Comparative Study of DLF and L & T

Sandeep Goel¹

First Published 1 Jun 2022. https://doi.org/10.5958/j.0976-173X.4.1.005

Article Information

Volume 4, Issue 1 January-June, 2013

¹Dr. Sandeep holds ‘Double Doctorate’ in Finance and in Accounting from the Faculty of Management Studies (FMS), University of Delhi. He has over 17 years of academic and industry experience, currently working at the Management Development Institute, Gurgaon. He has authored 3 books and published over 25 articles in national and international journals of repute. He can be reached at sandeep@mdi.ac.in/ sandeepgoel18@ rediffmail.com

Abstract

There has been a universal pressure on fi rms to create shareholder value; therefore, a suitable measure of corporate fi nancial performance and incentive compensation plans that encourage managers to increase shareholder wealth is always stressed upon. One professedly recent innovation in the fi eld of fi nancial performance measurement is a trade-marked variant of residual income known as economic value added (EVA). This paper attempts to highlight the importance of EVA in valuing the fi nancial performance of a company and its impact on shareholder value in terms of market returns. It attempts to analyse the EVA reporting practices of the Indian construction companies on comparative basis with respect to value creation for the shareholders.

Keywords

EVA (economic value added); Net operating profi t after tax (NOPAT); Weighted average cost of capital (WACC); Market; Return

JEL Classifi cation: G3, G32

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