Economic value added (eva) and market returns. The case of companies quoted on the Nairobi Stock Exchange

Abstract

Economic Value Added (EVA) has been getting plenty of attention in recent years as a new form of performance measurement. The objective of this study was to calculate EVA of the companies listed at the Nairobi stock exchange and empirically determine the relationship between EVA and stock return.

The data for the study was obtained from the annual published reports and accounts of the companies and publications from the Nairobi stock exchange. The data was analysed and presented using a simple regression model.

The results indicated that there is no relationship between EVA and market return and therefore do not fully support the arguments of EVA proponents that it is the best measure of shareholders return. There was however a strong relationship between EVA and capital employed which implies that EVA would give a better estimate of the performance of shareholders fund than market return.