Abstract
Today, it is unquestionable the importance that organizational management is supported by indicators. Also, knowledge of value creation and operating risk are information that differentiates this management support. This study aimed to verify the relationship between the value creation generated by companies included in the sample and the indicators used in operating risk (cost-volume-profit analysis). In the literature review the concept of value creation and the indicators usually used to measure operating risk, break-even point, margin of safety, and degree of operating leverage, were presented and characterized, as well as the Economic Value Added (EVA®), which was the value-based performance measure used in the study. The sample consists of 27 non-financial companies listed in Euronext Lisbon and the period analyzed was the one between 2014 and 2018. The data were obtained through the consolidated annual accounts of the sample companies, and its analysis was performed using the multivariate statistical analysis technique, linear regression. The results showed that the estimated multiple linear regression model allowed, with a very reasonable quality, to estimate the impact that the break-even point and the margin of safety variables have on the variation of the value of EVA®. This study gives significant information showing how operating risk indicators affect value creation, which is considered one the main objectives of companies.
Highlights
Combining information given by indicators obtained through the information provided by financial accounting and management accounting allows us to study whether there is a relationship between value creation generated in companies and their break-even analysis.From this perspective, characterizing each of the indicators we will use, EVA®, as a performance measure to access value creation and the break-even point, operating margin of safety and degree of operating leverage, to measure operating risk, we will perform a study based on a multiple linear regression model using a sample of the companies listed in Euronext Lisbon, at the time of the study
It began with a literature review on EVA® as an indicator to measure value creation and on operating risk, where it was characterized and presented the operating break-even point, the operating margin of safety, and the degree of operating leverage, as indicators to measure, this risk
After the presentation of the methodology, which showed the population and the sample of the case study, a multiple linear regression model was performed based on the calculations of the values obtained for EVA®, break-even point and the margin of safety, since the degree of operating leverage was abandoned, because it was not statistically significant
Summary
Combining information given by indicators obtained through the information provided by financial accounting and management accounting allows us to study whether there is a relationship between value creation generated in companies and their break-even analysis. From this perspective, characterizing each of the indicators we will use, EVA®, as a performance measure to access value creation and the break-even point, operating margin of safety and degree of operating leverage, to measure operating risk ( known as cost-volume-profit analysis), we will perform a study based on a multiple linear regression model using a sample of the companies listed in Euronext Lisbon, at the time of the study. The study reveals its importance by analyzing factors that may maximize or condition value creation
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