IS ECONOMIC VALUE ADDED SUPERIOR TO EARNINGS AND CASH FLOWS IN EXPLAINING MARKET VALUE ADDED? AN EMPIRICAL STUDY

Ahmad N. Obaidat
Tafila Technical University

ABSTRACT

This study investigates if Economic Value Added (EVA) is superior to Net Operating
Profit after Tax (NOPAT) and Net Cash Flow (NCF) in explaining the change in the Market Value
Added (MVA) of the non-financial firms listed on Amman Stock Exchange (ASE) for the year
2016. The results indicated that NCF has the strongest power in explaining the change in MVA,
followed by EVA. The results also indicated that the NOPAT does not add any additional
significant explanatory power to NCF and EVA in explaining the change in MVA. Finally, this
study recommends the use of EVA as an enhancement tool to the existing traditional accounting
performance measures, not as a substitute to them.

Keywords: Economic value added, earnings, cash flow, market value added