The Effect Of Economic Value Added On Stock Return: Evidence From Selected Companies Of Karachi Stock Exchange.

Abstract

EVA can be used for the purposes of setting organizational goals, performance measurement, determining bonus, communication with shareholders and investors, motivation of managers, capital budgeting, corporate budgeting, corporate valuation, etc. The study is aim to find the effect of economic value added (EVA) on stock return of companies listed at KSE-100 index. Research model uses the panel data technique. A sample of 59 listed selected companies out of 100 companies listed at KSE. Data collected on annual basis, interpreted and analyzed from the year 2006 to 2010. The model is estimated for sample companies in different industrial group levels. Results indicate that the value of the stock is affected by variable economic value added (EVA) and it is significant at a level less than 10%. Economic Value Added (EVA) is a key performance index that initiates or motivates companies to find out ways to increase efficiency of capital utilization and consequently produce a superior operating performance, and therefore should in theory reflect a stock’s intrinsic value.

KEYWORDS: EVA, Stock Return, KSE. Shareholders value, value creation