Economic Value Added versus Traditional Performance Metrics in the Czech Food-Processing Sector

Abstract

The aim of this article is to investigate the relationship between Economic Value Added, traditional performance measures (Return on Assets ‘ROA’ and Return on Equity ‘ROE’) and their ability to measure the creation of shareholder wealth in food-processing firms in the Czech Republic. To assess the relationship, a simple regression test was used and the following hypothesis were tested: • a strong positive linear relationship exists between EVA and the traditional performance measures of ROA and ROE and • the EVA measure reflects changes in shareholder wealth more consistently than the traditional performance measures ROA and ROE. The regression analysis results indicate in all cases a positive correspondence between EVA and financial performance metrics and show higher quality information content of EVA indicator as regards the ability to create shareholder wealth than the traditional performance measures.economic value added, traditional performance metrics, information content, food-processing sector, Consumer/Household Economics, Production Economics, Research Methods/ Statistical Methods, Q10, Q11,