Abstract

Current research examines the main performance measures (Net income (NI), residual income (RI), economic value added (EVA) & free cash flow (FCF)) of firm and management to find out whether EVA works better than other performance measures in terms of evaluating the firm’s performance. Then we examine the predictability of Economic Value Added for future performance. For doing this, we employ both relevant information content and incremental information content of measures. Our results generally show that EVA is the best measure for evaluating the performance of firm and management among other measures. Furthermore, we find that EVA has low predictability for performance and FCF has slightly superior predictability compared to other measures.

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