Review of Related Literature

3.1 Literature Review on Conceptulisation of Value Added 3.2 Literature Review on conceptulisation of Value Added Statement (VAS) 3.3 Literature Review on Usefulness of Value Added Statement (VAS) 3. Literature Review on VAS as a tool of !erformance "valuation 3.# Literature Review on "conomic Value Added ("VA) 3.$ Literature Review on %ar&et Value Added (%VA) 3.' Literature Review on Relations(ip )etween "VA and %VA 3.* Summar+

A literature review is desi,ned to identif+ related researc(- to set t(e current researc( pro.ect wit(in a conceptual and t(eoretical conte/t. 0t is ,enerall+ carried out to &now a)out t(e e/istin, practices and to fasten t(e researc( process. Under t(is )ac&drop- t(e present c(apter covers an overview of Value Added Accountin, and Reportin,. 1or t(e purpose an e/tensive surve+ was made on literature availa)le on t(e su).ect and found more t(an 1#2 articles)oo&s and researc( reports pu)lis(ed on t(e su).ect since 13# . 4(e researc( pu)lis(ed concentrated mainl+ on t(e Conceptulisation of Value Added Conceptulisation of Value Added Statement (VAS) Usefulness of Value Added Statement (VAS) VAS as a tool of !erformance "valuation "conomic Value Added ("VA) %ar&et Value Added (%VA)- and Relations(ip )etween "VA and %VA 3.1 Literature Review on Conceptulisation of Value Added Morely, (19'*)1 defined Value added is t(e value- w(ic( t(e entit+ (as added in a period t(at e5uals its sales less )ou,(t6in6,oods and services (). 0n terms of e5uation it ma+ )e e/pressed as follows7 Value added 8 Sales 9 :ou,(t6in6,oods and services. ICAI, (19 !)2 defines Value added is t(e increase in mar&et value )rou,(t
1

%ic(ael 1. %orle+- ;4(e Value Added Statement in :ritain<- 4(e Accountin, Review- =ul+ 13'3- p.$22

a)out )+ an alteration in t(e form- location or availa)ilit+ of a product or service e/cludin, t(e cost of )ou,(t6in6materials and services. 4(is can )e e/pressed in t(e followin, e5uation7 Value added 8 Value after alteration 9 Value )efore alteration "rown and #oward (199$)3- t(e value added can )e measured as t(e sales value less t(e cost of )ou,(t6in6,oods and services used in producin, t(ose sales. Van %taden ($&&&'(, Value added (as )een defined as t(e value created )+ t(e activities of a firm and its emplo+ees> i.e. sales less t(e cost of )ou,(t6in6 ,oods and services. L. %tain)an* ($&&9) stated t(at- Value added is t(e surplus of sales revenue plus ot(er incomes from ,oods and services over t(e cost of )ou,(t6in6,oods and services from outside. Ru++les! is of t(e view t(at- ;t(e value added )+ a firm- i.e. t(e value created )+ t(e activities of t(e firm and its emplo+ees alone- can )e measured )+ t(e difference )etween t(e mar&et value of t(e ,oods t(at (ave )een turned out )+ t(e firm and t(e cost of t(ose ,oods and materials purc(ased from ot(er firms. Annual %urvey of Industries (A%I', descri)ed value added as t(at part of t(e value of t(e products w(ic( is created in t(e factor+ and is computed )+ deductin, from t(e ,ross e/6factor+ value of output- t(e ,ross value of input. 4(e terms ?t(e ,ross e/6factor+ value of output@ and ?t(e ,ross value of input@ correspond wit( t(ose of ?t(e mar&et value of ,oods t(at (ave )een turned out@ and ?t(e cost of t(ose ,oods and materials purc(ased from ot(er firm@
2 3

Alossar+ of t(e 0nstitute of C(artered Accountants of 0ndia- Sept. 13*3.

:rown- =.L. and Boward L.R7 %ana,erial Accountin, C 1inance- London7 4(e "n,lis( Lan,ua,e :oo& Societ+- 13*2- p. *1 . Van Staden- C.=. (2222)- Revisitin, t(e Value Added Statement7 4o !u)lis( or Dot to !u)lis( in !roceedin,s of t(e 12t( Asian pacific Conference on 0nternational Accountin, 0ssues- Ecto)er.
4 5 $

Ru,,les- R7 Dational 0ncome and 0ncome Anal+sis- Dew For&- %cAraw Bill :oo& Co.- 13 3- p. $ Annual Surve+ of 0ndustries- C.S.E.- 13$$- Vol 0- p. /viii

respectivel+. 4(us in accountin,- value added is t(e e/cess of ?output@ over ?input@. %at(ematicall+ it can )e e/pressed as follows7 Value Added (VA) 8 (Aross e/6factor+ value of output) 9 (Aross value of 0nput) G(ereEutput 8 (a,,re,ate value of products H wor& done for customers H Sales value of ,oods sold in t(e same condition as )ou,(t I stoc& of semi6 finis(ed ,oods) 0nput 8 Aross value of materials- fuel etc- wor& done )+ ot(er concerns for t(e firm- non6industrial service )ou,(t- depreciation and purc(ase value of ,oods sold in t(e same condition as )ou,(t. Lewis and -endrill (19 .'. mentioned t(at- ;Value added ma+ )e calculated as t(e difference )etween t(e value of ,oods or services produced )+ t(e team- i.e. sales revenue- less t(e value of ,oods and services purc(ased from outsiders- i.e. t(e cost of )ou,(t in materials and services. /0e 1epart2ent of Co22erce, United States e/pressed t(at- ;Value Added )+ manufacturer is calculated )+ su)tractin, t(e cost of materialssuppliers and containers- fuel purc(ased- electric ener,+ and contract wor& from t(e total value of s(ipments. 0n t(at it appro/imates t(e value created in t(e process of manufacturer- value added provides t(e most satisfactor+ measure of t(e relative economic importance of ,iven industries in t(e census of manufactures. CIMA ter2inolo+y defines t(e term value added as- ;4(e increase in t(e mar&et value resultin, from an alteration in t(e form- location or availa)ilit+ of a

Lewis- Ric(ard and !endrill Javid7 Advanced 1inancial Accountin,- London7 !itman !u)lis(in, Ltd. 13*'- p. ##2
7

C(artered 0nstitute of %ana,ement Accountants- 4(e C(artered 0nstitute of %ana,ement Accountants- 222# edition- p23

product or service- e/cludin, t(e cost of )ou,(t out materials or services<. 4(is concept ma+ )e e/pressed in e5uation form as follows7 Value Added8 Value after Alteration 9 Value )efore Alteration. 3o0ler4s 1ictionary for Accountants (199!' 9 states t(at t(e fi,ure of value added is arrived at )+ deductin, t(e cost of )ou,(t in ,oods and services purc(ased from outside from t(e sales revenue plus income from services. 0t ma+ )e represented as follows7 Value Added8 (Value of Eutput H 0ncome from Services) 6 (Cost of %aterials and Services !urc(ased from outsiders) 1rom a)ove- it is o)served t(at t(ere are various tec(ni5ues of measurin, t(e value added and t(us it is necessar+ to develop a standard practice for its measurement- so t(at t(e performance of different enterprises ma+ )e .ud,ed in a meanin,ful wa+ and inter6firm as well as intra6firm comparison ma+ )e possi)le. 3.$ Literature Review on conceptulisation of Value Added %tate2ent (VA%' Value Added Statement (VAS) is actuall+ aimed at supplementin, a new dimension to t(e e/istin, s+stem of corporate financial accountin, and reportin, t(rou,( t(e disclosure of additional information re,ardin, t(e amount of wealt( created )+ an or,aniKation in an accountin, period and t(e wa+ t(e wealt( (as )een distri)uted )+ t(e enterprise amon,st all t(e sta&e(olders (i.e. emplo+eesproviders of loan capital- ,overnment and owners) w(o (ave contri)uted to t(e ?wealt( created@. Various aut(ors define VAS differentl+- as stated )elow7 L Ric0ard and 1. -endril, (19 .'1& defines it as ;4(e statement w(ic( s(ows t(e income of t(e compan+ as an entit+ and (ow t(at is divided )etween t(e people w(o (ave contri)uted to its creation<.
9
12

Lo(ler@s Jictionar+ for Accountant- Dew Jel(i !rinces Ball of 0ndia- 133# (0ndian Reprint) Lewis- Ric(ard and !endrill Javid7 Advanced 1inancial Accountin,- London7 !itman !u)lis(in, Ltd. 13*'- p. ##2.

Value Added Statement ma+ )e defined as a statement w(ic( s(ows t(e siKe of t(e ?value added ca&e@ and (ow t(e ?ca&e@ (as )een divided amon,st t(e various sta&e(olders (%i5er, 19.9)11. Value Added Statement (VAS) reveals t(e value added )+ an enterprise w(ic( it (as )een a)le to ,enerate and its distri)ution amon, t(ose contri)utin, to its ,eneration &nown as sta&e(olders (ICAI, 19 !)12. Value Added Statement ma+ )e defined as t(e performance of an or,aniKation to w(at e/tent t(e enterprise (as added value durin, a particular period to t(e providers of capital- emplo+ees- ,overnment and reinvestment of t(e ,rowt( and e/pansion (A+arwal, $&&$'13. Value Added Statement is a report w(ic( s(ows t(e amount and t(e sources of value added durin, some specified period of time. 0n ot(er words- it is also descri)ed as e/tra wealt( created )+ sellin, ,oods and services to t(e customers. So it is entitled as ?wealt( ,enerated and distri)uted@ (Rao, 1999'1(. 4(e value added statement reports on t(e calculation of value added and its application amon, t(e sta&e(olders in t(e compan+ (V. %taden, $&&&)1# 4(us a Value Added Statement is a statement- w(ic( s(ows t(e income of t(e compan+ as an entit+ and (ow t(at is divided )etween t(e people w(o (ave contri)uted to its creation. G(ile t(e income statement reports on t(e income of s(are(olders- t(e value added statement reports on t(e income earned )+ a lar,e ,roup of sta&e(olders7 providers of capital plus emplo+ees and t(e ,overnment.
11 12

SiKer- =o(n7 An 0nsi,(t into %ana,ement Accountin,- London7 !itman !u)lis(in, Ltd.- 13'3- p.3# 0CA0- - Alossar+ of terms- !rentice Ball of 0ndia- Dew Jel(i- 13*# A,rawal- R.S.- 2222- Value Added Statement6 A )etter performance indicator6 A case stud+ of %%4C4(e %ana,ement Accountant- Jec. 2*- p6*3632. !.%. Rao- Value Added Reportin,7 0n 4(eor+- !ractice and Researc(- Jeep and Jeep !u)lications 2222- !! *$ Van Staden- C.=. (2222)- Revisitin, t(e Value Added Statement7 4o !u)lis( or Dot to !u)lis( in !roceedin,s of t(e 12t( Asian pacific Conference on 0nternational Accountin, 0ssues , Ecto)er.

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Since VAS represents (ow t(e value or wealt( created or ,enerated )+ an entit+ is s(ared amon, different sta&e(olders- it is si,nificant from t(e national point of view. 4(erefore- VAS represents a move in a new and different direction for financial reportin,. 3.3 Literature Review on 6sefulness of Value Added %tate2ent (VA%' L.7. %tain)an*, (1991)1$ in (is article ?t(e value added statement7 does it add an+ valueM@ %editari Accountanc+ Researc(- Vol. 1' 0ss7 2- pp.13' 9 1 3surve+ed t(e preparers of value added statements and finall+ concluded t(at it is desira)le to prepare a value added statement. C.7. Van %taden, (199 )1' N4(e usefulness of t(e value6added statement in Sout( AfricaN- %ana,erial 1inance- Vol. 2 0ss7 11- pp. 9 #3- Reports a surve+ of representatives of all financial statement user ,roups in Sout( Africa to assess t(eir use of VASs- t(eir pro)lems- possi)le future uses and t(e information needsOdecisions )ein, affected. Compares past and present use of VASs- discusses t(eir s(ortcomin,s and concludes t(at t(e+ s(ould not )e pu)lis(ed in Sout( Africa an+ more. 8ary Mee* C %idney 8ray (19 '1 ar,ued t(at value added statements

(VAS) would s(ow profits in a format t(at would )e easil+ understood and usa)le )+ all sta&e(olders rat(er t(an .ust t(e s(are(olders. 4(e VAS s(ows (ow value created )+ a compan+ is used to pa+ t(ose sta&e(olders w(ic( created t(e wealt( or value added. %oreover- t(e+ identified four areas t(at would )enefit from VAS reportin,7 measurin, wealt( created )+ t(e compan+- emp(asiKin, sta&e(older interdependence- conditionin, emplo+ee e/pectations of pa+ and prospects- and
16

Stain)an&- L. 1331 .4(e value added statement 6 its nature and purpose- % Com 4(esis- Universit+ of Datal- Jur)an.
1'

C.=. van Staden- (133*) N4(e usefulness of t(e value6added statement in Sout( AfricaN%ana,erial 1inance- Vol. 2 0ss7 11- pp. 9 #3

Aar+ %ee& C Sidne+ Ara+ (13**)- ?4(e Value Added Statement7 An innovation for U S companiesAccountin, BoriKons- pp'36*1
18

esta)lis(in, productivit+ incentive pro,rams. %easurin, and reportin, wealt( t(rou,( VAS would raise t(e ,eneral pu)lic@s awareness of a compan+@s activities)enefitin, t(e compan+ and t(e pu)lic. 0t is noted t(at t(ou,( income received t(e most attention- )ut are not t(e most effective wa+ to s(ow a compan+@s performance. 4(e VAS emp(asiKes t(e interdependence of t(e sta&e(olders )+ s(owin, (ow sources of income are paid to emplo+ees- ,overnments- providers of capital- and t(e )usiness. Mee* and 8ray (199 ' wrote t(at VAS would )enefit emplo+ees )+ conditionin, t(eir e/pectations for pa+ and )+ formin, a )asis for productivit+ incentive pro,rams. C. R. %ar*ar C 3. C. 9andi, ($&11)13 in t(eir stud+ on ?Corporate Social !erformance t(rou,( Value Added Reportin,7 A case stud+ of Bindustan !etroleum Corporation Ltd@ concluded t(at mana,ement of t(e compan+ (as not onl+ improved its profita)ilit+ )ut (as also fulfilled its responsi)ilit+ towards t(e societ+ at lar,e )+ pu)lis(in, VAS. "rown and Rao, ($&&&)22 opines t(at t(e Value Added Statement s(ows t(e total wealt( created and (ow it was distri)uted- ta&in, into account t(e amounts retained and reinvested in t(e ,roup for t(e replacement of assets and development of operations. 4(e value added statement s(ows t(e total wealt( created- (ow it was distri)uted to meet certain o)li,ations and reward t(ose responsi)le for its creation- and t(e portion retained for t(e continued operation and e/pansion. 0n addition- a num)er of surve+s (ave )een conducted amon, companies pu)lis(in, t(e statement (Mayne, 1999)21. 4(ese surve+s found little evidence of actual
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use.

4(e

companies

used

t(e

statement

mostl+

for

emplo+ee

C. R. Sar&ar and Dandi- L. C. (2211)7 Value Added 0ncome7 An Accountin, !oint of View - 0ndian =ournal of !u)lic "nterprise- 0nstitute of !u)lic "nterprise Researc(- B+dera)ad. :rown and Rao (2222)- Corporate Social !erformance t(rou,( Value Added Reportin,- =ournal of Accountin, and 1inance- Volume 1- Dum)er 1- %arc(- 2223
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21

%a+ne- =. (1333)- Addressin, Attri)ution t(rou,( Contri)ution Anal+sis7 Usin, !erformance %easures Sensi)l+. Ettawa

communication

and

wa,e

ne,otiations.

4(e

Corporate

Report

(13'#)

recommended- amon, ot(er t(in,s- a statement of value added s(owin, (ow t(e )enefits of t(e efforts of an enterprise are s(ared )+ emplo+ees- providers of capital- t(e state- and reinvestment. Value added (t(at is- sales income less materials and services purc(ased) is t(e wealt( t(e reportin, entit+ (as )een a)le to create )+ its own and its emplo+eesP efforts (Ria0i:"el*aoui, 1999)22. 4(is statement would s(ow (ow value added (as )een used to pa+ t(ose contri)utin, to its creation. 0t usefull+ ela)orates on t(e profit and loss account and in time ma+ come to )e re,arded as a prefera)le wa+ of descri)in, performance. %in0a (19 3'$3 su)mits t(at t(e statement of value added provides a useful measure to (elp in ,au,in, performance and activit+. 4(e fi,ure of value added can )e a pointer to t(e net output of t(e firm> and )+ relatin, ot(er &e+ fi,ures (for e/ample- capital emplo+ed and emplo+ee costs) si,nificant indicators of performance ma+ )e o)tained. G(ile income statement reports on t(e income of s(are(olders- t(e value added statement reports on t(e income earned )+ a lar,e ,roup of sta&e(olders6 providers of capital plus emplo+ees and t(e ,overnment. VAS reveals t(e VA )+ an enterprise w(ic( it (as )een a)le to ,enerate and its distri)ution amon, t(ose contri)utin, to its ,eneration &nown as sta&e(olders (ICAI, 19 !'$(. 4(e ,rowt( of value added reportin, was (elped )+ trade

union support of t(e concept. A document produced )+ one of t(e trade unions stated- N4(e 1ederation t(erefore aims to encoura,e t(e use of t(e added value as a discipline- so t(at all mana,ers- wit( or wit(out e/perience of accountin,

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Ria(i6:el&aoui- A. 1333."arnin,s6Returns Relation versus Det6Value Added6Returns Relation7 4(e Case for a Donlinear Specification- Advances in Quantitative Anal+sis of 1inance and Accountin,Vol. - pp1'#61*#. Sin(a- A. (13*3)- Value Added 0ncome- :oo& Gorld- Calcutta Ibid

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practices- will appreciate t(e financial environment wit(in w(ic( decisions affectin, manpower are ta&en (Ria0i "el*aoui, 19 )2#.

4o t(e la)our movement- t(e value added report was deemed a ,ood ve(icle for information disclosure and a )asis for determinin, wa,es and rewards w(at is termed value added incentive pa+ment sc(eme ( Rao, $&&&)2$ 0n addition to t(ese uses- Cruns (19 $)2' mention its occasional use in t(e conte/t of t(e performance of :ritis( industr+- in reformin, compan+6wide profit6s(arin, sc(emes- and in facilitatin, financial performance anal+sis. Alt(ou,( evidence was found in t(is review t(at value added information (as ,reater predictive and e/planator+ power t(an earnin,s- t(ese findin,s were inconclusive. 3.( Literature Review on VA% as a tool of -erfor2ance ;valuation A. %u)ra2aniya2 C ". 9i2alat0asan, ($&1&' $ in a stud+ for appraisin, t(e performance and .ud,in, t(e productivit+ of A:ADS manufacturin, compan+ listed in Colom)o Stoc& "/c(an,e concluded t(at VA fi,ure can )e re,arded as t(e inde/ of mana,erial performance and t(e+ would )e more sensitive to displa+ t(e vivid picture a)out t(e efficienc+ of mana,ement of a firm in a (i,(l+ comple/ and competitive )usiness environment. L.7. %tain)an*, ($&&9)23 in (is article N4(e value added statement7 does it add an+ valueMN %editari Accountanc+ Researc(- Vol. 1' 0ss7 2- pp.13' 6 1 3
25 2$

Ria(i6:el&aoui- A. (133$)- !erformance Results in Value Added Reportin, , Quorum :oo&s- Gestport Rao- !.%. (2222)- ;Value Added Reportin,< in 4(eor+ and !ractice of Researc(- Jeep and Jeep !u)lications- Dew Jel(i Cruns- R.!. (13*2)- Added6Value7 4(e Roots run Jeep into Colonial and "arl+ America- Accountin, Bistorian =ournal- fall. A. Su)ramani+am C :. Dimalat(asan- (2212)- 0ndustrial Relation S+stem7 Lessons for :an,lades( and Sri Lan&a from =apanese !erspectives- "conomic Science Series- !etroleum6Aas Universit+ of !loiesti :ulletin- 23O2212 i)id

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4(e value added statement (as )een voluntaril+ reported )+ Sout( African companies for man+ +ears despite reservations a)out its usefulness. 4(e results of t(e empirical surve+ indicate t(at t(e ma.orit+ of t(e respondents are of t(e opinion t(at it is desira)le to prepare a value added statement- )ut t(at it is not used in t(e ma.orit+ of companies. 4(e article recommends t(at t(e preparation of t(e value added statement s(ould )e standardised. Bowever- t(e disclosure of an independentl+ prepared value added report ma+ )e more useful to all users. /. C0ristop0er, %. #assan, C A. Isla2, (199$)32 on a stud+ on NVoluntar+ Reportin, of Value Added Statements in Sin,aporeN- Asian Review of Accountin,Vol. 0ss7 1- pp.2# 9 3- o)served t(at pu)lication of VAS is positivel+ related to firmPs interest covera,e- siKe- and industr+ mem)ers(ip- of w(ic( t(e latter two varia)les- firm siKe and industr+ mem)ers(ip- are also found to )e si,nificant in t(e Australian studies. "adani and %a*sena (13*3)31 in t(eir stud+ concluded t(at since t(e corporate sector occupies an important place in t(e national econom+- t(ere is an imperative need to disclose t(e value added statement. A firm is an enterprise or decision6ma&in, centre and Accountanc+Ps role in t(is re,ard is to report t(e results to t(e various interested parties in wa+s t(e+ can understand )est. %uo<anen (13# )32 su,,ested t(e value added concept for income measurement- as a wa+ for mana,ement to fulfill t(eir accountin, dut+ to t(e various interest ,roups )+ providin, more information t(an was possi)le from t(e income statement and )alance s(eet. 4(is ma&es (im one of t(e first writers to use t(e value added concept in terms of accountin, for t(e results of an enterprise

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4(eo C(ristop(er- Salle( Bassan- Ati5ue 0slam- (133$) NVoluntar+ Reportin, Ef Value Added Statements 0n Sin,aporeN- Asian Review of Accountin,- Vol. 0ss7 1- pp.2# 6 3 :ad(ani and Sa&sena(13*3)- Corporate Social Jisclosure in !u)lic "nterprises- in %. Saeed ("d.) Corporate 1inancial Reportin,- Annual !u)lication- Dow Jel(i- pp. #26##- 222# Suo.anen- G E (13# )-@Accountin, 4(eor+ and Lar,e corporations- 4(e Accountin, Review- pp.33163*

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0n t(e words of Clar*e (13* )- a firm not ma&in, an+ profits is onl+ considered ?sic&@ )ut firm not ma&in, an+ contri)ution- )+ creatin, wealt( or value- to t(e societ+ ma+ )e termed as a ?social parasite@. 4(e inclusion of value added statement in t(e corporate annual report is must in accountin,. 3arpi* and "el*aoui (1332)33 in t(eir stud+ esta)lis(ed t(at value added accountin, information could suppl+ considera)le e/planator+ power of mar&et ris& )e+ond t(at provided )+ earnin,s or cas( flow measures- especiall+ at t(e individual firm level. Mat0ews C -erera (133$) reported t(at in Dew Realand ver+ few companies pu)lis(ed a VAS as part of t(eir financial statement. 0n Sout( Africa t(e interest in value added statements started wit( t(e pu)lication of t(e Corporate Report in 13'#. Unli&e t(e situation in t(e United Lin,dom- w(en t(e incidence of pu)lication (as fallen since 13*2- t(e incidence of Sout( Africa companies pu)lis(in, t(e value added statement (as increased. Ria0i:"el*aoui and R.1. -icur3( in t(eir stud+ in 133 concluded t(at value added information can suppl+ important e/planator+ power of securit+ valuation )e+ond t(at provided )+ earnin,s. Similarl+ -avli*r and Ria0i:"el*aoui (133 )3! in t(eir stud+ e/amined t(e effect of owners(ip structure on a value added measure of performance. 4(e+ concluded t(at w(en t(e concentration of owners(ip is low- total return ma/imiKation as measured )+ value added is also low and vice6versa. Ria0i:"el*aoui (133$)3, found t(at value added information pu)lis(ed concurrentl+ wit( earnin,s does (ave additive information content. 0n t(e same
33

Larpi&- !. C :el&aouiP- A. 1332- 4(e Relative Relations(ip )etween S+stematic Ris& and Value Added Varia)les- =ournal of 0nternational 1inancial %ana,ement and Accountin,- Vol.3 pp.2#362'$
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Ria(i6:el&aoui- A. C !icur- R.J. 133 ."/plainin, %ar&et Returns7 "arnin,s versus Value Added Jata%ana,erial 1inance- Vol.22 Do.3-pp. 6##
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Ria(i6:el&aoui- A. C !avli&r- 133 ."/plainin, %ar&et Returns7 "arnin,s Versus Value Added Jata%ana,erial 1inance- Vol.22 Do.3- pp. 6##. Ria(i6:el&aoui- A. 133$.!eiformance Results in Value Added Reportin,- Quorum :oo&s- GestportConnecticut

36

+ear (e also found t(at value added6returns relations(ips offered )etter e/planator+ power t(an t(e earnin,s6return relations(ips- w(en t(e relations(ips were e/pressed )+ a non6linear conve/6concave function. "ao and "ao(133$)3. e/amined t(e time series properties of value added as well as prediction accurac+ of t(e value added series. %0a*untala2oni (13'*) made a stud+ w(ic( was underta&en wit( t(e o).ective of anal+sin, trends in value and distri)ution of value added in selected te/tiles millscomposite mills and 11 spinnin, mills was selected for t(e stud+. 4(e stud+ (as concluded t(at all t(e 1# te/tile mills- under t(is stud+- (ave improved t(eir net value added. Bowever- t(e factors influencin, t(e level of net value added (ave not )een covered in t(is stud+. "urritt and Clar*e (13* )3 reported t(at t(e Australian approac( to value added (ad )een ver+ cautious- s(owin, not(in, li&e t(e initial Keal in :ritain. A few companies pu)lis(ed value added statement as a re,ular supplement to t(e traditional accounts. 9e+eswara Rao (2223)39 in (is stud+ made an attempt to evaluate t(e performance of pu)lic enterprises )+ appl+in, t(e value added approac(. Bis stud+ (as covered all t(e production enterprises in t(e pu)lic sector in 0ndia. 4(e main findin, of t(e stud+ is t(at t(e contri)ution in terms of value added )+ pu)lic enterprises is massive and social surplus ,enerated is more in t(e case of petroleum industries. 0n a researc( stud+ %u)0as0 C0ander, (19 9)(& made an attempt to &now t(e practices adopted )+ t(e pu)lic and private sector enterprises in 0ndia
37

:ao- :. C:ao- J. 133$- 4(e 4ime Series :e(avior and !redictive6A)ilit+ Results of Annual Value Added Jata. =ournal of :usiness 1inance CAccountin,- April 133$- pp. 36 $2 :urritt- R.L. and 1. Clar&e- (13* )- w(at are t(e prospects for corporate value added statements in AustraliaM 4(e C(artered Accountant in Australia %a+ 13* - 3$633. Rao- Da,eswar 2223- Jisclosure !ractices of Value Added Statements in !u)lic "nterprises- 4(e %ana,ement Accountant- %arc( 2$- p6332. Su)(as( C(ander- (13*3)- ?Corporate Reportin, !ractices in 0ndia@ Jeep and Jeep !u)lications- Dew Jel(i pp3#'6#*

38

39

40

re,ardin, t(e disclosure of value added statement in t(eir annual reports. 4(is stud+ covered 122 companies (#2 from pu)lic sector and #2 from private sector for t(e +ears 13*# 9*'). 0t (as revealed t(at onl+ 1' companies- 3 from pu)lic sector and * from private sector- disclosed t(is statement in t(eir annual reports. 4(is stud+ (as esta)lis(ed t(at value added concept is definitel+ an improvement over t(e traditional profit and loss concept in t(e sense t(at it puts t(e efforts of different interested ,roups in an or,aniKation into a proper perspective. "0attac0aryya, (1991'(1 in (is stud+ made an attempt to evaluate t(e leadin, issues and controversies in respect of value added concept. 4(is stud+ (as concluded t(at t(e contri)utors of capital (ave released a part of retained earnin,s one of value for developin, industrial estates and for e/tendin, real )enefits to t(eir la)our forces as it confirms Larl %ar/@s contention of Surplus Value. %0ar2a (1331) in a stud+ made an attempt to evaluate t(e performance of 4ata 4ea Limited )+ appl+in, t(e value added concept. 4(e value added statements of 4ata 4ea Limited (as s(own an increase in value added from Rupees #331.*2 la&(s durin, 13*39* to Rs. '#$2. 3 la&(s durin, 13*'9 **. 4(is stud+ (as pointed out t(at enterprise- not ma&in, profit s(all )ecome sic& )ut not ,eneratin, value added ma+ die over a period of time. Moni,(1991) in (is stud+ made an attempt to populariKe t(e four wa+s i.e.price increase- product development and diversification- increasin, sales and cost reduction- )+ w(ic( manufacturin, companies can increase added value. 4(e stud+ (as revealed t(at added value is a )etter indicator of t(e performance of a compan+ t(an t(e sales turnover. 4(is stud+ (as concluded t(at t(e creation of added value (i.e. wealt( creation) s(ould )e t(e fundamental o).ective of an+ compan+ )ecause added is t(e &e+ to t(e success.

:(attac(ar++a- S L (1331)-Value Added Concept of 0ncome7 return needed for corporate ,rowt(C(artered Secretar+- =an .1331
41

%0an*araia0, (1991) in (is stud+ esta)lis(ed t(e si,nificance

of value

added concept as a tool for corporate performance appraisal since it (elps t(e mana,ement to assess t(e performance of t(e compan+- to compare and anal+Ke t(e ,rowt( of t(e compan+ and ena)le t(em to identif+ t(e factors t(at are to )e controlled to improve t(e performance. 8anesan (199()($ made an attempt to measure value )+ 11 spinnin, mills in 4amil Dadu in order to assess t(eir performance. 4(is stud+ (as revealed t(at added value is a )etter indicator of t(e performance of mill t(an t(e net profit. 4(is stud+ (as concluded t(at it (as laid foundation for full6fled,ed development of concept of value added and for effective corporate reportin,. %0an*araia0, (1999' in (is stud+ esta)lis(ed t(e si,nificance of value

added concept as a tool for corporate performance appraisal since it (elps t(e mana,ement to assess t(e performance of t(e compan+- to compare and anal+Ke t(e ,rowt( of t(e compan+ and ena)le t(em to identif+ t(e factors t(at are to )e controlled to improve t(e performance. %0ar2a C A+arwal, (1991' in t(eir stud+ made an attempt to evaluate t(e performance of nine State Road 4ransport Corporations of 0ndia in t(e perspective of value added concept. 4(is stud+ (as concluded t(at t(e State Road 4ransport Corporation is contri)utin, muc( to t(e societ+ t(rou,( t(e ,eneration of emplo+ment and ta/es. 4(e .ustification for t(e e/istence of State Road 4ransport Corporations was found on its capacit+ to ,enerate surplus alon, wit( t(e value added. 4(e stud+ (as esta)lis(ed t(at t(e value added concept is a (i,(l+ useful met(od to evaluate t(e operational efficienc+ of t(ese transport corporations. 4(e researc( of "urc0ell et.al (13*#)(3 indicated t(at t(e incidence of pu)lication reac(ed a clima/ in 13*2- )ut started declinin, after t(at. 0n U.L.-

42
43

Aanesan- S.- (133 )- Jeterminants of value added- =ournal of accountin,- Vol. #* April- pp. 1613.

:urc(ell S.- Clu)) C.- Bopwood A.A. (13*#)7 Accountin, in its social conte/t7 towards a (istor+ of value added in t(e United Lin,dom. Accountin,- Er,aniKations and Societ+- 127 3*1 13.

t(ere were- t(erefore- definite trend towards and awa+ from t(e pu)lication of value added statement. Van %taden ($&&3'(( is of t0e opinion t0at %out0 Africa is at present e=periencin+ t0e 0i+0est incidence of pu)lication of t0e value added state2ent reported anyw0ere in t0e world to date. In addition researc0 investi+atin+ t0e predictive a)ility of value added infor2ation 0as )een conducted in t0e 6%A since 199&, even t0ou+0 t0e value added state2ent 0as not )een pu)lis0ed t0ere. /0e researc0 reported in 0is paper sets out to esta)lis0 w0et0er t0e value added state2ent is a disclosure wort0 considerin+ )y co2panies around t0e world, )y investi+atin+ t0e %out0 African e=perience wit0 t0e value added state2ent. 0n 0ndia- a lar,e num)er of companies are preparin, Value Added Statements (VAS) wit( a view to disclose t(e income under t(e social perspective. 4(e companies- w(ic( are preparin, t(is statement- are not onl+ interested to e/(i)it t(e income from t(e s(are(older@s point of view )ut also interested to e/(i)it t(e income under social conte/t. 4(is welcome c(an,e in t(e attitude of t(e corporate sector (as made t(is sector an inte,ral part of t(e societ+. Bowever- in 0ndia- ver+ few researc( studies (ave )een underta&en on t(e value added concept. 3.# Literature Review on "conomic Value Added ("VA) 0n t(is section a review of earlier literature in t(e area of "conomic Value Added is presented. En reviewin, t(e articles pu)lis(ed in )ot( forei,n and 0ndian .ournals on t(e su).ect matter> it was o)served t(at t(ere are ver+ few studies amon, t(ese researc( wor&s w(ic( (ave )een done t(eoreticall+ and also empiricall+ in 0ndia. Bowever- t(e summar+ of t(e articles pu)lis(ed in t(e .ournals- varied views- opinions and commands pertainin, to t(eor+ and empirical
44

Van Staden C.=. (2223)7 4(e relevance of t(eories of political econom+ to t(e understandin, of financial reportin, in Sout( Africa7 t(e case of value added statements. Accountin, 1orum- 277 22 92

wor& of t(e concepts of "conomic Value Added ("VA) (ave )een summariKed in a c(ronolo,icall+ as under7 %tern (199&'(! o)served t(at "VA as a performance measure captures t(e true economic profit of an or,aniKation. "VA6)ased financial mana,ement and incentive compensation sc(eme ,ives mana,er )etter 5ualit+ information and superior motivation to ma&e decisions t(at will create t(e ma/imum s(are(olders@ wealt( in an or,aniKation. "VA is a performance measure w(ic( is most closel+ lin&ed to t(e creation of s(are(olders@ wealt( over a period of time. %tewart (199('(, (as e/pended t(at "VA is a powerful new mana,ement tool t(at (as ,ained worldwide reco,nition as t(e standard tool of corporate performance. "VA presents an inte,rated framewor& of financial mana,ement and incentive compensation. 8rant (199,'(. found t(at t(e "VA concept ma+ (ave everlastin,l+ c(an,ed t(e wa+ real profita)ilit+ is measured. A surve+ was conducted t(at e/amines t(e empirical relations )etween "VA and corporate valuation. Results su,,est t(at "VA si,nificantl+ )an,s t(e %ar&et Value Added of a firm and t(at t(is wealt( effect stems from t(e compan+@s residual return on capital. Ra<es0war (199.'( offered in (is stud+ t(at "VA can also )e used as a device for s(are(olders@ communication and mana,er incentive s+stem- apart from measurin, t(e financial performance of or,aniKation. Jemand for "VA amon, t(e corporate world (as spurred competition amon, financial consultants- w(o (elp in computin, "VA of )usiness or,aniKations.

Stern-=oel- ;one wa+ to )uild value in +our firm- "/ecutive Compensation<- 1inancial "/ecutiveDovOJec. 1332- pp. #16# .
45

Stewart- A. :ennet- ;"VA4% 1act and 1antas+<- =ournal of Corporate 1inance- Vol. '- Do. 2- =une 133 - pp. '16* .
46 47

Arant- =.- ;1oundation of "VA for investment mana,ers7 =ust in time- "VA<- =ournal of 1inancial %ana,ement- 133$- Vol.23- Do.1- pp. 1(*). Ra.es(war- C.- ;"conomic Value Added7 Rediscover+ Value<- 1inancial Anal+st- Jec 133'- pp.336 .

48

;t0ira< (199 '(9 derived t(at in 0ndian mar&et man+ companies are usin, capital inefficientl+ and t(us destro+in, value. 4(e tool to measure capital efficac+ and economic value is economic value added. 4a&in, "VA as a tool of financial performance BLL and 04C stand at t(e top of t(e list. Also important is t(e relation )etween "VA and total operatin, capital emplo+ed. 4(is would s(ow (ow muc( value t(e compan+ (as ,enerated in relation to t(e assets it (as deplo+ed. 0t is ar,ued t(at stoc& price move up as a compan+ adopts "VA as an internal performance criterion. %a=ena (199 '!& elucidated t(at t(ere is no one met(od of measurin, financial performance t(at is totall+ perfect. 4(us a measure s(ould )e suc( t(at satisfies s(are(olders@ e/pectations and is also )ein, committed )+ top mana,ement. "VA is a measure t(at s(ould )e used )+ top mana,ement to evaluate investment center mana,ers- )ecause it considers ,oal con,ruence )etween s(are(olders and mana,ers. "aner<ee and 7ain (1999'!1 carried out a researc( )ased on empirical data. Amon, t(e selected independent varia)les ("!S- "VA- Lp- Lp- and AREDG) "VA (as proved to )e t(e most e/planator+ varia)le- w(en %VA was ta&en as t(e dependent varia)le and :ac&ward "limination %et(od was applied to find t(e most e/planator+ independent varia)le. 1or t(is purpose t(e time frame was of ei,(t +ears and all t(e varia)les were calculated over t(is period for t(e sample companies. %0and ($&&&'!$ sa+s "conomic value added ("VA) measures a corporationPs true economic profit. 4(e o).ective of "VA is to understand w(ic( )usiness units )est levera,e t(eir assets to ,enerate returns and ma/imiKe s(are(older value.
49 50

"t(ira.- Aovindra.- ;4(e "VA feat(er in t(e mar&et cap<- 4(e "conomic 4imes- 21Sep 133*- p.1 Sa&sena- !an&a.- ;"conomic Value Added and performance evaluation<- 4(e %ana,ement Accountant- %a+ 133*- pp. 3 16 2 :aner.ee- As(o&- and =ain- ;"conomic Value Added and S(are(older Gealt(7 An "mpirical Stud+ of Relations(ip<- !aradi,m- Vol.3- Do.1- =anO=une 1333- pp.33613# Jawne S(and- ;"conomic value added<- Computerworld- 1ramin,(am- Vol. 3 - 0ssue. - Ect 2222.

51

52

8urudas ($&&&'!3 e/amines t(e different wa+s in w(ic( it can )e ascertained w(et(er t(e value of a s(are is )ein, en(anced or not. Be starts )+ loo&in, at t(e s(ift from "arnin, per S(are- !rice earnin,s Ratio- etc. to "conomic Value Added and %ar&et Value Added. Be demonstrates (ow "VA is t(e )est measure for deducin, s(are(older value en(ancement. "aner<ee ($&&&'!( sa+s Corporations in t(e US (ave started disclosin, "VA information from t(e )e,innin, of 32s as a measure of corporate performance. 0t is )elieved t(at mar&et value of a firm ((ence s(are(older wealt() would increase wit( t(e increase in "VA. Various studies done in t(e US also confirm t(is )elief. 7awa0ar Lal and Mali* ($&&1)## sa+ t(at "conomic Value Added is toda+@s (ottest financial idea and it can )e well considered a revolution in mana,ement. 0n t(eir opinion "VA is a measure of corporate performance and reflects all t(e dimensions )+ w(ic( mana,ement can increase value. R. Ray ($&&1'!, anal+Kes t(e efficienc+ of "conomic Value Added- t(e relativel+ new financial6mana,ement tool. 4(is anal+sis offers a new definition of value- and su,,ests t(at t(e missin, lin& in t(e "VA process is productivit+,enerall+ found to )e t(e en,ine of all economic ,rowt(. Ra2ana ($&&('!. )elieves t(at t(e development in t(e 0ndian capital mar&et- )ot( in dept( and )readt( alon, wit( t(e increased awareness amon, t(e s(are(olders- (as increased t(e pressure on t(e companies to consistentl+ perform )etter. Ene of t(e indicators of suc( performance is t(e %ar&et Value Added

53

Sa)a Aurudas- ;S(are(older Value and "VA7 Dew Corporate Aoals<- c(artered accountant- April 2222- pp. $6#1 :aner.ee As(o&- ;Lin&a,e )etween economic value added and mar&et value7 an anal+sis<- Vi&alpa2#(3)- =ul6sep 2222- pp. 2363$. =awa(er Lal- %ad(u %ali&- ;"conomic Value Added ("VA) and corporate performance<- 4(e %ana,ement Accountant- 3$(')- =ul+ 2221- pp #2*6#3

54

55

Russ Ra+- ;"conomic value added7 4(eor+- evidence- a missin, lin&<- Review of :usiness- =o(ns Universit+- Colle,e of :usiness Administration- Vol. 22- 0ssue. 1O2- Sprin, 2221.
56

J.V. Ramana- ;%ar&et Value Added and "conomic Value Added7 "mpirical "vidence from 0ndian %ar&et<- Savier 0nstitute of %ana,ement- :(u)aneswar- 222 .
57

(%VA). As per Stewart@s (1331) claim- "VA is t(e ultimate pro/+ of %VA. Several studies e/amined t(e relations(ip )etween "VA and %VA and %ost of t(em found evidence to support Stewart@s claim. Jespite t(e popularit+ of t(e concept- ver+ few studies (ave )een underta&en to empiricall+ test t(e a)ilit+ of "VA to reflect or pro/+ t(e %VA of 0ndian companies. 4(us (e ma&es in (is stud+ an attempt to fill t(e ,ap and empiricall+ e/amines t(e relations(ip )etween %VA and "VA of t(e 0ndian companies. 1inall+ (e indicates t(at t(ere is no stron, evidence to support t(at "VA is superior to t(e traditional performance measures in its association wit( %VA 3., Literature Review on Mar*et Value Added (MVA' ARM 7oi)ary2, ($&1$'! is of opinion t0at Mar*et Value Added (MVA' is t0e difference )etween t0e 2ar*et value of an enterprise and t0e capital contri)uted )y s0are0olders and investors. 8reater Mar*et Value Added (MVA' 0i+0li+0ts t0at t0e enterprise 0as added 2ore value t0an w0at was contri)uted )y t0e s0are0olders and investors, w0ile a ne+ative Mar*et Value Added (MVA' displays t0at t0e enterprise destroys value. In fact, a ne+ative Mar*et Value Added (MVA' reveals t0at t0e value of 2ana+e2ent actions and invest2ent are lower t0an t0e value of t0e contri)ution to t0e co2pany )y t0e capital 2ar*et. Mar*et Value Added (MVA' is a tool to 2easure s0are0older4s value at a particular 2o2ent t0at was introduced )y %tewart in 1991. Mar*et Value Added (MVA' is t0e additional 2ar*et capitali5ation over and a)ove t0e )oo* value of e>uity (8upta ? 3undu, $&& '!9. @ro2 an investor4s point of view, MVA is t0e )est final 2easure of a co2pany4s perfor2ance.

AR% =oi)ar+m- (2212) %ar&et !erformance %easurement Ef :an,alore Stoc& "/c(an,e- =ournal of Radi/ 0nternational "ducational and Researc( Consortium- Vol.1 Sept 2212 pp '
58

59

Aupta- A. and Lundu- J. (222*)- "n(ancin, profita)ilit+ and s(are(older value t(rou,( mer,er 9 A case stud+ of 0C0C0 :an&- Vid+asa,ar Universit+ =ournal of Commerce- %ar- Vol. 13

%tewart (1991',& states t0at MVA is a cu2ulative 2easure of corporate perfor2ance and t0at it represents t0e stoc* 2ar*et4s assess2ent fro2 a particular ti2e onwards of t0e net present value of all a co2pany4s past and pro<ected capital pro<ects. MVA is calculated at a +iven 2o2ent, )ut in order to assess perfor2ance over ti2e, t0e difference or c0an+e in MVA fro2 one date to t0e ne=t can )e deter2ined to see w0et0er value 0as )een created or destroyed. Mar*et value added (MVA' is an e=ternal 2easure of 0ow 2uc0 )etter off t0e s0are0olders are as a conse>uence of 2ana+e2entAs perfor2ance. 3.. Literature Review on Relations0ip )etween ;VA and MVA %tewart (1991',1 investi,ated evidence of t(e correlation )etween economic value added ("VA) and mar&et value added (%VA) usin, $13 US firms over 13*'613** period and anal+Kin, )ot( levels and c(an,es in "VA and %VA. Bis findin,s displa+ed t(at t(ere is stron, relations(ip )etween t(e two levels of "VA and %VA- and even more pronounced- )etween c(an,es in t(ese levels. Since t(ere was (i,( correlation )etween c(an,es in "VA and %VA- (e su,,ested t(at adoptin, of t(e o).ective of ma/imiKin, "VA and "VA ,rowt( would actuall+ )uild a premium into mar&et value of t(e firm. 8rant (199,',$ identified t(e ?wealt(6creators@ and t(e ?wealt(6destro+ers@ amon, a set of companies wit( t(e (elp of "VAOCapital emplo+ed and %VAOCapital emplo+ed measurements. 4(e findin,s e/(i)ited t(at t(e ratio- "VAOCapital emplo+ed can predicate appro/imatel+ 32T of t(e variation in %VAOCapital emplo+ed.

Stewart- A. :ennet- ;"VA4% 1act and 1antas+<- =ournal of Corporate 1inance- Vol. '- Do. 2- =une 133 - pp. '16* .
60

61 62

0)id 0)id

6ye2ura, 3antor and -etit (199,',3 used a sample of t(e 122 lar,est USA )an&s for t(e period )etween 13*$ to 133#.4(e+ calculated t(e %VA and tested t(e correlation wit( "VA as well as four ot(er accountin, measures- namel+ net income (D0)- "arnin,s per S(are ("!S)- Return on "5uit+ (RE")- and Return on Assets (REA). 4(e results of t(eir researc( indicated t(at t(ere is a stron, relation )etween "VA and %VA. 4(e correlations )etween t(ese performance measures and %VA are7 "VA 2T- REA 13T- RE" 12T- D0 *T and "!S $T. Milunovic0 and /suei (199,',( displa+ed t(at %VA is stron,l+ correlated wit( "VA t(an wit( 1C1- 1C1 ,rowt(- "!S- "!S ,rowt(- and RE". @ernande5 ($&&1'
,!

studied t(e correlation )etween "VA and %VA of #*2

American companies for t(e period 13*363'. 0t was s(own t(at for 23$ firms in t(e sample t(e c(an,es in t(e DE!A4 (ad (i,(er correlation wit( c(an,es in %VA t(an t(e "VA- w(ile for 212 sample firms t(e correlation )etween "VA and %VA was ne,ative. 3i2, A0n, and Bun ($&&(',, o)tained direct stron, positive correlation )etween "VA and %VA from )ot( tests of t(e parametric and nonparametric. !erformance indicators c(osen in t(e stud+ usin, mar&et value added (%VA) as a pro/+ for s(are(older value of companies listed on t(e =S" Securities "/c(an,e Sout( Africa did not support superiorit+ of "VA. 4(e findin,s su,,ested stron,er relations(ips )etween %VA and cas( flow from operations. 4(e stud+ also found ver+ little correlation )etween %VA and "VA.

63

U+emura- J.A.- Lantor- C.C.- and !etit- =.%. (133$)- "VA for :an&s7 Value creation- Ris& %ana,ement and !rofita)ilit+ %easurement. =ournal of Applied Corporate 1inance 6 :an& Am = Appl Corp 1inance - Vol. 3- Do. 2- pp. 3 6123
6422

19

%ilunovic(- S.- C A. 4suei- (133$)- "VA in t(e Computer 0ndustr+- =ournal of Applied Corporate 1inance- vol. 3- Do. 2- pp. 12 611#
6521

1ernandeK- !. (2221)- S(are(older value creators and s(are(older value destro+er in U.S.A7 +ear 2222. SSRD "6 =ournal- wor&in, paper- Do.2'22#2- JE07 12.2133Ossrn.2'22#2
66

Lim- =o(n =.- A(n- =ae6B+eon- C Fun- =. L. (222 ). "conomic value added ("VA) as a pro/+ for mar&et value added (%VA) and accountin, earnin,7 empirical evidence from t(e )usiness c+cle. American academ+ of accountin, C finance (!. 161$)

#er2anu (222')$' in (is t(esis e/amined relations(ip )etween "VA- %VA and SiKes of a compan+ and its s(are price performance 133# 6 222$ in 0ndonesia. 4(e result of t(e anal+sis s(owed t(ere is no relations(ip )etween "VA- %VA and SiKes of a compan+. 3. %u22ary 0t is o)served t(at t(ere are various concepts and tec(ni5ues of measurin, t(e value added and t(us it is necessar+ to develop a standard practice for its measurement- so t(at t(e performance of different enterprises ma+ )e .ud,ed in a meanin,ful wa+ and inter6firm as well as intra6firm comparison ma+ )e possi)le. A Value Added Statement is a statement- w(ic( s(ows t(e income of t(e compan+ as an entit+ and (ow t(at is divided )etween t(e people w(o (ave contri)uted to its creation. G(ile t(e income statement reports on t(e income of s(are(olders- t(e value added statement reports on t(e income earned )+ a lar,e ,roup of sta&e(olders7 providers of capital plus emplo+ees and t(e ,overnment. Since VAS represents (ow t(e value or wealt( created or ,enerated )+ an entit+ is s(ared amon, different sta&e(olders- it is si,nificant from t(e national point of view. 4(erefore- VAS represents a move in a new and different direction for financial reportin,. Alt(ou,( evidence was found in t(e review t(at value added information (as ,reater predictive and e/planator+ power t(an earnin,s- t(ese findin,s were inconclusive. 0n 0ndia- a lar,e num)er of companies are preparin, Value Added Statements (VAS) wit( a view to disclose t(e income under t(e social perspective. 4(e companies- w(ic( are preparin, t(is statement- are not onl+ interested to e/(i)it t(e income from t(e s(are(older@s point of view )ut also interested to
Bermanu- Aiotto. (222'). Anal+sis of "conomic Value Added ("VA)- %ar&et Value Added (%VA)- and Compan+ SiKe and its relation to compan+ s(are price performance of 32 listed companies in =S". Under,raduate t(esis- :inus 0nternational Universit+- 222'
67

e/(i)it t(e income under social conte/t. 4(is welcome c(an,e in t(e attitude of t(e corporate sector (as made t(is sector an inte,ral part of t(e societ+. Bowever- in 0ndia- ver+ few researc( studies (ave )een underta&en on t(e value added concept. Jespite t(e popularit+ of t(e concept- ver+ few studies (ave )een underta&en to empiricall+ test t(e a)ilit+ of "VA to reflect or pro/+ t(e %VA of 0ndian companies. 4(us (e ma&es in (is stud+ an attempt to fill t(e ,ap and empiricall+ e/amines t(e relations(ip )etween %VA and "VA of t(e 0ndian companies. 1inall+ (e indicates t(at t(ere is no stron, evidence to support t(at "VA is superior to t(e traditional performance measures in its association wit( %VA.