EVA™, EPS, ROA and ROE as Measures of Performance in Australian Banks: A Longitudinal Study

By Gregory Laing, Kirsty Dunbar

This research empirically tests the relative and incremental information content of performance measures EVA, EPS, ROA and ROE against the Market Value of the shares in the four major Australian banks. Data was obtained from database sources for the purpose of calculating the EVA and extracting the EPS, ROA, ROE and Share Market Value of the four major banks in Australia for the years 2003 to 2011.

Two null hypotheses were derived from the literature and tested using the Multiple Linear Regression method. In contrast to results commonly reported, no significant relationship was found between EVA and the market value in terms of relevant information content. However, the incremental information content of EVA was found to be significant in the model tested. This study did not test the different models for calculating EVA which future research may investigate. Future research may also examine more performance measures in the model.



About Prof Janek Ratnatunga 1129 Articles
Professor Janek Ratnatunga is CEO of the Institute of Certified Management Accountants. He has held appointments at the University of Melbourne, Monash University and the Australian National University in Australia; and the Universities of Washington, Richmond and Rhode Island in the USA. Prior to his academic career he worked with KPMG.

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