Financial Performance Measures And Shareholder Value Creation: An Empirical Study For Chilean Companies

Abstract

<span style="font-family: Times New Roman; font-size: small;"><p class="MsoNormal" style="margin: 0in 0in 0pt;">This paper focuses on the most important Chilean companies and studies whether EVA<sup>TM</sup> dominates REVA and competing accounting measure in explaining shareholder value creation.<span style="mso-spacerun: yes;">  </span>Our results indicate that REVA outperforms alternative measures in associations among their current and lagged realizations and value creation.<span style="mso-spacerun: yes;">  </span>However, at the industry level, REVA explains value creation only for construction and investment industries.<span style="mso-spacerun: yes;">  </span>For the remaining industries, in addition to the high explanatory power associated to REVA, the net income and operating cash flows help to explain only a low portion.<span style="mso-spacerun: yes;">  </span>We conclude that accounting measures should be only considered as marginal complementary performance measures used to compensate executives mainly from the electric, beverage, metallurgic and pension fund industries.</p></span>