Does Eva Beat Earnings? Round 2: Evidence from Internet Companies

21 Pages Posted: 5 Oct 2000

See all articles by Nicholas Ho

Nicholas Ho

University of New South Wales

Norman Hui

University of New South Wales

Linus Li

UNSW Australia Business School, School of Accounting

Date Written: Undated

Abstract

In this research proposal, we seek to contribute to the current debate between earnings and EVA by attempting to show that EVA is a better measure of firm performance in certain circumstances. We argue that the Internet sector provides an appropriate research setting given its relatively high marketing, advertising and R&D expenses, which will result in high divergence between earnings and EVA measurements. Suspecting that some of the expenses should be capitalized in the balance sheet instead prompts us to hypothesize that EVA can better reflect the underlying market activity and the performance of the firms. In addition to our main regression test, two further tests on firm type effects and EVA response coefficient are designed to provide more evidence on our results that EVA is a better measure over other earnings based measure.

Key words: Internet stocks; Economic Value Added (EVA); Earnings; Performance measurement

JEL Classification: G12, G14, M41

Suggested Citation

Ho, Nicholas and Hui, Norman and Li, Linus, Does Eva Beat Earnings? Round 2: Evidence from Internet Companies (Undated). Available at SSRN: https://ssrn.com/abstract=235404 or http://dx.doi.org/10.2139/ssrn.235404

Nicholas Ho

University of New South Wales

School of Accounting
Sydney, New South Wales 2052
Australia

Norman Hui

University of New South Wales

School of Accounting
Sydney, New South Wales 2052
Australia

Linus Li (Contact Author)

UNSW Australia Business School, School of Accounting

Sydney, NSW 2052
Australia

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