Company value creation and its impact on shareholder return : evidence from the Baltic states

Abstract

The concept of company value creation, as one of the key goals of management, has been developed and discussed by practitioners and researchers for several decades. As limitations of traditional accountingbased company performance measures have increasingly caused dissatisfaction, the discussion on value creation measurement and the relationship between value creation and shareholder return has attracted significant attention in research literature. Investigation of relationship between value creation indicators and shareholder return has been widespread, but with diverse outcomes. Limited attention has been drawn to analysis of EVA and its evolution in small markets. The aim of the paper is to analyse value creation of Baltic listed companies and investigate whether value creation indicator outperforms accounting-based alternative measures of firm performance in relationship with stock return in the Nasdaq OMX Baltic Stock Exchange in the period of 2007 – 2010. The mixed results of empirical research show ability of EVA indicator to outperform accounting performance measures in explaining stock return.