Empirical study on the effectiveness of engineering management tools: EVA and FGV

EVA and FGV are new tools for performance measurement and engineering management. The paper tests the value relevance of EVA, FGV and traditional performance measurements such as ROE, EPS, and CFOPS. Ohlson model, relative information content test and incremental information content test are used to do the work. The result of relative information test shows that FGV´s relative information content is largest. It is more highly associated with corporate value than EVA, EPS, ROE, and CFOPS. Although EVA is also associated with corporate value, it is not as remarkable as EVA advocator´s proposed. The result of incremental information test reveals that EVA and FGV all have significant incremental information content. It also suggests that EVA and FGV have significant incremental explanatory ability to corporate value. And FGV has more incremental explanation than EVA.