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Usefulness of Value Added and Abnormal Economic Economic Earnings: An Empirical Examination
Author(s) -
Bao BenHsien,
Bao DaHsien
Publication year - 1998
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/1468-5957.00186
Subject(s) - explanatory power , earnings , economics , variable (mathematics) , value (mathematics) , benchmark (surveying) , econometrics , empirical examination , statistics , accounting , actuarial science , mathematics , mathematical analysis , philosophy , geodesy , epistemology , geography
This paper investigates the usefulness of two alternative measures of performance: value added and abnormal economic earnings. Using earnings as the benchmark, firm value analysis, levels analysis, and changes analysis were performed to evaluate their explanatory power. Results show that value added is a statistically significant variable; its explanatory power is higher than that of earnings. Abnormal economic earnings, however, are not a significant variable.