Abstract
Value-based management has gained prominence in both business and academia, supported by the notion that It is no longer sufficient for a company to generate profit, it is also required that the profit be higher than the cost of the total capital invested in the company. To increase value creation, managers need to understand which are its relevant determinants (value drivers). Therefore, this study aims to identify the main value creation drivers measured by EVA® (economic value added), one of the value-based performance measures more referenced in financial literature. A sample of non-financial listed companies on Euronext Lisbon, from 2011 till 2016, is analyzed. The data was collected from the companies’ annual consolidated financial reports. The data was analyzed using tree statistical analysis techniques, binary logistic regression, Pearson correlation coefficient, and t-test for independent groups, with SPSS (Statistical package for social sciences). The results show that the variables more relevant to value creation are the operating profit margin ratio, invested capital turnover, and the cost of equity rate. This study provides valuable information that assists managers in their decision-making, allowing to maximize value creation, through the identification of the main value drivers, and it also contributes to the dissemination on the subject of value creation.
Highlights
Value-based management has revealed a significant impact on business and academic environment since modern financial theory considers value creation as one of the companies’ main objectives, fundamental to ensure its continuity [1]
The present work aims to identify which are the main drivers of value creation, measured by EVA®, in nonfinancial companies listed in Euronext Lisbon from the period between 2011 and 2016
This study aims to contribute to future studies on the analysis of value drivers and value creation performance measures, with emphasis on EVA®
Summary
Value-based management has revealed a significant impact on business and academic environment since modern financial theory considers value creation as one of the companies’ main objectives, fundamental to ensure its continuity [1]. A company is considered to create value when it obtains profitability greater than the opportunity cost of the total invested capital. New performance measures based on value creation have emerged. EVA® is a measure of internal usage, easy to use, applicable to any type of company, that considers the cost of the total invested capital. These reasons explain why this measure was chosen to be used in this study. The present work aims to identify which are the main drivers of value creation, measured by EVA®, in nonfinancial companies listed in Euronext Lisbon from the period between 2011 and 2016. The literature review addresses the concepts of value creation, value-based management, value drivers and EVA®
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