Economic Value Added EFFECT ON THE RETURN OF RECEIVED BY SHAREHOLDERS

Economic Value Added EFFECT ON THE RETURN OF
RECEIVED BY SHAREHOLDERS
JOURNAL OF ACCOUNTING & FINANCE

The test results indicate that EVA does not have influence
significantly to the return received by shareholders. During the period
research, in each year, just as much as 13-15 companies
which has a positive EVA, which means less than 50%. From the corporate side,
there are only 9 companies which consistently posted positive EVA each
year: namely PT Aqua Golden Mississippi, PT Indofood Sukses Makmur, PT
Multi Bintang Indonesia, PT Sari Husada, PT Gudang Garam, PT HM
Sampoerna, PT Laboratories, PT Merck Indonesia and PT Unilever
Indonesia. These companies belong to companies which have a
blue chip stock or a market leader in the group.
In the study period is known that many companies still have to
principal and interest burden of large debt, which among other
caused due to foreign exchange fluctuations in the past.
To calculate EVA, debt interest is yet to be coupled with
expense of equity, the next one will be a major component of capital
charges, which will be deducted from the Adjusted NOPAT. To bear
interest expense from debt alone, many companies are only able to produce
minimal profit or even suffer losses, as shown in
statements of income, especially if it must take into account the expense of equity. This
which led many companies to eventually produce EVA
negative. Another reason could be associated with the above results is the fact
about the complexity of the calculation of EVA. EVA figures are not directly available in
company's financial statements, in contrast to operating cash flows and earnings,
which can be directly obtained from the consolidated income and cash flows. For
calculating EVA, it takes a lot of data, especially for the adjustment
accounting and calculation of WACC, which comes from the notes to the report
financial or other sources. As a result of this complexity, the
capital market participants face problems in time to make decisions
investment based on EVA.

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