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  • Australian Evidence Concerning the Information Content of Economic Value-Added

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    Author(s)
    C. Worthington, Andew
    West, Tracey
    Griffith University Author(s)
    Worthington, Andrew C.
    Year published
    2004
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    Abstract
    Pooled time-series, cross-sectional data on 110 Australian companies over the period 1992–1998 is employed to examine whether the trademarked variant of residual income known as economic value-added (EVA®) is more highly associated with stock returns than other commonly-used accounting-based measures. These other measures of internal and external performance include earnings, net cash flow and residual income. Three alternative formulations for pooling data are also employed in the analysis, namely, the common-effects, fixed-effects and random-effects models, with the fixed-effects approach found to be the most empirically ...
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    Pooled time-series, cross-sectional data on 110 Australian companies over the period 1992–1998 is employed to examine whether the trademarked variant of residual income known as economic value-added (EVA®) is more highly associated with stock returns than other commonly-used accounting-based measures. These other measures of internal and external performance include earnings, net cash flow and residual income. Three alternative formulations for pooling data are also employed in the analysis, namely, the common-effects, fixed-effects and random-effects models, with the fixed-effects approach found to be the most empirically appropriate. Relative information content tests reveal returns to be more closely associated with EVA® than residual income, earnings and net cash flow, respectively. An analysis of the components of EVA® confirms that the GAAP-related adjustments most closely associated with EVA® are significant at the margin in explaining stock returns.
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    Journal Title
    Australian Journal of Management
    Volume
    29
    Issue
    2
    DOI
    https://doi.org/10.1177/031289620402900204
    Copyright Statement
    © 2004 University of New South Wales. The attached file is reproduced here in accordance with the copyright policy of the publisher. Use hypertext link to access the journal's website.
    Subject
    Commerce, Management, Tourism and Services
    Publication URI
    http://hdl.handle.net/10072/21739
    Collection
    • Journal articles

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