The relationship between Economic Value Added and Malaysian stock market performance

Abstract

This study examines the relationship between Economic Value Added (EVA), being the measurement for value creation of companies and the Malaysian stock market performance. The study specifically segregated samples into companies which are value creator (with positive EVA) and value destroyer (with negative EVA) and examine how this two type of samples have any impact on the Malaysia stock market performance. The analysis was done on a total of 534 observations in the year 2010. Overall, findings of the study show that the results for value creator companies are insignificant. On the other hand, although the value destroyer companies generated a significant result but the correlation with the Malaysian stock market performance is relatively low. The evidences discovered in the study will enhance the body of literature with further justification on the validity of the EVA model approach as an indicator for value creation measurement.