The correlation of EVA and MVA with stock price of companies in Tehran stock market

Abstract

Nowadays, worldwide, investors are seeking more stockholder value than just earning high profit, therefore, every company aims to maximize its stockholder value and considers it as its ultimate target. To evaluate companies' ability in creating stockholder value, investors do want to focus on their financial performance and consider the stock price of companies as the usher of that. For a long time, traditional measures of performance like Earning per Share, Return on Investment, etc., have been used by investors to measure stockholder value creation in companies, but according to the potential weaknesses of the traditional measures of performance, they have gravitated to use value based measures of performance which focus on changes in value. The value based measures of performance are diverse and there is no consensus between scholars about their competence in evaluating financial performance of companies perfectly. To assess the ability of the value based measures in evaluating stockholder value creation, in this paper the attempt is made to examine the relationship between stock price behaviour of companies and two of the most important value based measures, economic value added and market value added in Tehran Stock Market. The results of the study corroborate the significant correlation of the research variables.