EVA
, an acronym for economic value added, is the registered tradename of Stern Stewart
& Company for their version of a long-known and compelling concept called residual income.
Hailed by Fortune as the “New Key to Creating Wealth” and “Today’s Hottest Financial
Product,” EVA has attracted considerable attention as a valuation and incentive tool. With a host
of consultants now marketing related metrics, numerous claims have been made – most based on
anecdotal evidence or in-house studies. However, little independent evidence has existed until
recently regarding EVA’s alleged advantages. This article helps fill this void by presenting results
from recent academic research.