An Empirical Study on Economic Value-Added and Market Value-Added of Selected Indian FMCG Companies

Abstract

This study examines if the selected seven Indian companies from FMCG sector listed on NSE, have created shareholder’s value, in terms of Economic Value Added (EVA) and Market Value Added (MVA) during the five years from 2010 to 2014. EVA is trademark of Stern Stewart Co, who conceptualized the term. Their contention is that EVA has got better predictive power in analyzing the financial performance of a company than other traditional methods like ROIC, EPS, ROA, ROS and ROE. MVA is taken as a proxy for determining the market value of the firms. In the present study, data of seven companies - Britannia, Marico, Dabur, ITC, HUL, Emami and Godrej - is analyzed to test the same. Correlation and Multiple Regression are used to test the claim. The Study supports Stern Stewart’s claim that the EVA is a better predictor of market value of the firms in terms of MVA compared to EPS and is successful in indicating stronger relationship and relevance to capital markets than other traditional measures.