The Importance of EVA and MVA

Oct 13, 2025 by talynt.org 106 views

In the financial world, company performance measurements often involve various indicators. One important indicator is Economic Value Added (EVA), which measures the economic added value produced by the company after considering the cost of capital. On the other hand, Market Value Added (MVA) reflects the company's market value, which is the difference between the market value of all company equity and the capital costs invested. This article aims to analyze the effect of EVA on MVA on banking companies listed on the Indonesia Stock Exchange.

Research Purposes

The main purpose of this study is to find out whether EVA partially affects MVA in banking companies listed on the Indonesia Stock Exchange. The EVA variable is influenced by the Net Operating Profit After Tax (NOPAT) and capital costs, while the MVA is influenced by the nominal value and the market value of shares and the number of shares circulating during the year. This study made us aware that companies that have high profits may not necessarily provide high welfare for their shareholders.

The Importance of EVA and MVA

EVA and MVA are two important indicators that help investors and analysts evaluate a company's performance. EVA measures the company's ability to generate profits above its cost of capital, while MVA reflects the company's market value. By analyzing the relationship between EVA and MVA, investors can gain a better understanding of a company's financial health and its potential for future growth.

Research Methodology

This research is a type of causal research with a sample consisting of 18 banking companies listed on the Indonesia Stock Exchange during the 2007 to 2009. Sample selection was carried out using the Purposive Sampling method. The data used are secondary data obtained from the Indonesian Capital Market Directory (ICMD) and the official website of the Indonesia Stock Exchange (www.idx.co.id). The data analysis process begins with classical assumptions testing, followed by hypothesis testing that uses simple linear regression methods.

Data Collection and Analysis

The data used in this study were obtained from the Indonesian Capital Market Directory (ICMD) and the official website of the Indonesia Stock Exchange (www.idx.co.id). The data were analyzed using simple linear regression methods to test the hypothesis that EVA affects MVA. The results of the analysis showed that EVA significantly affected MVA, indicating that an increase or decrease in EVA will have an impact on increasing or decreasing MVA.

Research Results

The results of this study showed that EVA significantly affected MVA. This means that an increase or decrease in EVA will have an impact on increasing or decreasing MVA. If the company is more focused on increasing EVA, the company operates in a way that is in line with the aim of maximizing the interests of shareholders. In other words, the higher the MVA value, the better the performance that has been done by the company.

Deeper Analysis

EVA can be considered an effective tool to measure company performance more comprehensively. When the company is able to produce positive EVA, this indicates that the company has created more value for shareholders after calculating capital costs. Meanwhile, high MVA shows that the market has a positive view of the company's prospects in the future.

It is important to note that although EVA and MVA have a close relationship, both reflect company performance within a different time frame. EVA provides a picture of added value produced within a particular year, while MVA includes company performance throughout its existence. Therefore, companies must always strive to increase EVA in order to support MVA growth in a sustainable manner.

Conclusion

By understanding the relationship between EVA and MVA, banking company managers can be better in making strategic decisions that lead to an increase in company value and the welfare of shareholders. Applying this analysis can provide a deeper insight about how operating performance can contribute to the long-term growth of the company in the capital market.

Implications of the Study

The findings of this study have several implications for banking companies listed on the Indonesia Stock Exchange. Firstly, the study highlights the importance of EVA as a measure of company performance. Secondly, the study shows that EVA has a significant impact on MVA, indicating that companies that focus on increasing EVA are more likely to achieve high MVA values. Finally, the study suggests that companies must always strive to increase EVA in order to support MVA growth in a sustainable manner.

Limitations of the Study

This study has several limitations that should be noted. Firstly, the study only analyzed the relationship between EVA and MVA in banking companies listed on the Indonesia Stock Exchange. Secondly, the study used a sample of 18 companies, which may not be representative of all banking companies listed on the Indonesia Stock Exchange. Finally, the study only analyzed the data for the period of 2007 to 2009, which may not reflect the current market conditions.

Future Research Directions

Future research should aim to extend the findings of this study in several ways. Firstly, future research should analyze the relationship between EVA and MVA in non-banking companies listed on the Indonesia Stock Exchange. Secondly, future research should use a larger sample size to increase the generalizability of the findings. Finally, future research should analyze the data for a longer period to reflect the current market conditions.

Conclusion

In conclusion, this study analyzed the effect of EVA on MVA in banking companies listed on the Indonesia Stock Exchange. The results showed that EVA significantly affected MVA, indicating that an increase or decrease in EVA will have an impact on increasing or decreasing MVA. The study highlights the importance of EVA as a measure of company performance and suggests that companies must always strive to increase EVA in order to support MVA growth in a sustainable manner.

In our previous article, we analyzed the effect of EVA on MVA in banking companies listed on the Indonesia Stock Exchange. In this article, we will answer some frequently asked questions (FAQs) about the topic.

Q: What is Economic Value Added (EVA)?

A: EVA is a measure of a company's economic performance, which takes into account the cost of capital. It is calculated by subtracting the cost of capital from the net operating profit after tax (NOPAT).

Q: What is Market Value Added (MVA)?

A: MVA is a measure of a company's market value, which is the difference between the market value of all company equity and the capital costs invested.

Q: How does EVA affect MVA?

A: The results of our study showed that EVA significantly affects MVA. This means that an increase or decrease in EVA will have an impact on increasing or decreasing MVA.

Q: What are the implications of the study for banking companies listed on the Indonesia Stock Exchange?

A: The study highlights the importance of EVA as a measure of company performance. It also shows that EVA has a significant impact on MVA, indicating that companies that focus on increasing EVA are more likely to achieve high MVA values.

Q: What are the limitations of the study?

A: The study has several limitations, including the use of a sample of 18 companies, which may not be representative of all banking companies listed on the Indonesia Stock Exchange. The study also only analyzed the data for the period of 2007 to 2009, which may not reflect the current market conditions.

Q: What are the future research directions?

A: Future research should aim to extend the findings of this study in several ways, including analyzing the relationship between EVA and MVA in non-banking companies listed on the Indonesia Stock Exchange, using a larger sample size, and analyzing the data for a longer period.

Q: How can banking company managers use the findings of this study?

A: Banking company managers can use the findings of this study to make strategic decisions that lead to an increase in company value and the welfare of shareholders. They can also use EVA as a measure of company performance to evaluate the effectiveness of their strategies.

Q: What are the benefits of using EVA as a measure of company performance?

A: The benefits of using EVA as a measure of company performance include its ability to provide a comprehensive picture of a company's economic performance, its ability to take into account the cost of capital, and its ability to provide a clear and concise measure of a company's performance.

Q: What are the challenges of using EVA as a measure of company performance?

A: The challenges of using EVA as a measure of company performance include its complexity, its reliance on accurate financial data, and its potential for manipulation.

Q: How can investors use the findings of this study?

A: Investors can use the findings of this study to evaluate the performance of banking companies listed on the Indonesia Stock Exchange. They can also use EVA as a measure of company performance to evaluate the effectiveness of a company's strategies.

Q: What are the implications of the study for investors?

A: The study highlights the importance of EVA as a measure of company performance. It also shows that EVA has a significant impact on MVA, indicating that investors should pay attention to a company's EVA when evaluating its performance.

Q: What are the future implications of the study?

A: The study has several future implications, including the potential for EVA to become a widely accepted measure of company performance, the potential for EVA to be used as a benchmark for evaluating company performance, and the potential for EVA to be used as a tool for making strategic decisions.

Q: What are the limitations of the study for investors?

A: The study has several limitations for investors, including the use of a sample of 18 companies, which may not be representative of all banking companies listed on the Indonesia Stock Exchange. The study also only analyzed the data for the period of 2007 to 2009, which may not reflect the current market conditions.

Q: What are the future research directions for investors?

Q: How can investors use the findings of this study to make informed investment decisions?

A: Investors can use the findings of this study to make informed investment decisions by evaluating the performance of banking companies listed on the Indonesia Stock Exchange using EVA as a measure of company performance. They can also use EVA as a benchmark for evaluating company performance and making strategic decisions.

Q: What are the benefits of using EVA as a measure of company performance for investors?

A: The benefits of using EVA as a measure of company performance for investors include its ability to provide a comprehensive picture of a company's economic performance, its ability to take into account the cost of capital, and its ability to provide a clear and concise measure of a company's performance.

Q: What are the challenges of using EVA as a measure of company performance for investors?

A: The challenges of using EVA as a measure of company performance for investors include its complexity, its reliance on accurate financial data, and its potential for manipulation.

Q: How can investors use the findings of this study to evaluate the performance of banking companies listed on the Indonesia Stock Exchange?

A: Investors can use the findings of this study to evaluate the performance of banking companies listed on the Indonesia Stock Exchange by using EVA as a measure of company performance. They can also use EVA as a benchmark for evaluating company performance and making strategic decisions.

Q: What are the implications of the study for regulators?

A: The study highlights the importance of EVA as a measure of company performance. It also shows that EVA has a significant impact on MVA, indicating that regulators should pay attention to a company's EVA when evaluating its performance.

Q: What are the limitations of the study for regulators?

A: The study has several limitations for regulators, including the use of a sample of 18 companies, which may not be representative of all banking companies listed on the Indonesia Stock Exchange. The study also only analyzed the data for the period of 2007 to 2009, which may not reflect the current market conditions.

Q: What are the future research directions for regulators?

Q: How can regulators use the findings of this study to make informed regulatory decisions?

A: Regulators can use the findings of this study to make informed regulatory decisions by evaluating the performance of banking companies listed on the Indonesia Stock Exchange using EVA as a measure of company performance. They can also use EVA as a benchmark for evaluating company performance and making strategic decisions.

Q: What are the benefits of using EVA as a measure of company performance for regulators?

A: The benefits of using EVA as a measure of company performance for regulators include its ability to provide a comprehensive picture of a company's economic performance, its ability to take into account the cost of capital, and its ability to provide a clear and concise measure of a company's performance.

Q: What are the challenges of using EVA as a measure of company performance for regulators?

A: The challenges of using EVA as a measure of company performance for regulators include its complexity, its reliance on accurate financial data, and its potential for manipulation.

Q: How can regulators use the findings of this study to evaluate the performance of banking companies listed on the Indonesia Stock Exchange?

A: Regulators can use the findings of this study to evaluate the performance of banking companies listed on the Indonesia Stock Exchange by using EVA as a measure of company performance. They can also use EVA as a benchmark for evaluating company performance and making strategic decisions.