EVA Reconsidered for the Greek Capital Market

Abstract

The present study examines the explanatory power of one value based performance measure (Economic Value Added) and three other traditional accounting measures (Earnings Per Share, Return On Investment, Return On Equity) in explaining stock market returns in the framework of Athens Stock Exchange for the period 1996-2005. Methodology is based on studies performed for the same capital market by Maditinos, Theriou and Sevic (2005; 2006), Maditinos, Sevic and Theriou G (2007), Maditinos, Sevic, Chatzoglou and Theriou (2007) and Maditinos, Sevic, Theriou and Demetriadis (2007). Results show EPS to provide the greatest value relevance in explaining stock market returns consistent with that of previous studies. Moreover, the explanatory power of the pair wise combinations of EVA with each traditional accounting performance measure is also examined. The pair wise combination of EVA with EPS grants for a significant increase of the explanatory power, compared to EPS explanatory power examined alone (from 2.9 to 7.6 per cent), in explaining stock market returns, consistent again with the previous findings.