Usefulness of Value Added and Abnormal Economic Economic Earnings: An Empirical Examination

Ben‐Hsien Bao and Da‐Hsien Bao

Journal of Business Finance & Accounting, 1998, vol. 25, issue 1‐2, 251-264

Abstract: 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.

Date: 1998
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