IS ECONOMIC VALUE ADDED MORE ASSOCIATED WITH STOCK PRICE THAN ACCOUNTING EARNINGS? EVIDENCE FROM PAKISTAN

This study seeks to provide an answer to the ongoing debate over the superiority of economic value added (EVA) upon traditional accounting based tools of performance measurement in explaining stock price of a firm. This Study was formulated to test the relative and incremental information contents provided by EVA and accounting measures of return like ROE,ROA, OCF,earnings per share after tax (EPSAT) and debt to equity ratio (DE). A total of 28 non financial firms listed at Karachi Stock Exchange were analyzedover the period 2009-2012. In order to empirically test the hypotheses, panel data regression was applied and our findings did not support the claim of EVA proponents of its superiority over accounting based measures of performance. Rather it was found that accounting measures outperformed EVA in explaining the behavior of stock prices of firms in Pakistani market. This study is the first of its kind in the context of Pakistan.