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Abstract

This paper examines the application of the increasingly popular economic value added (EVA) and cash value added (CVA) measures of financial performance of private and publicly-traded firms. EVA and CVA are measured for a sample of Polish firms. Since traditional accounting measures are not robust indicators of corporate performance of firms in transitional economies, these alternate measures provide better assessment of value/cash flow creation and solvency. The results suggest that Polish firms, though reportedly making accounting profits, are indeed unable to generate value to shareholders. Further, the cash flow measures indicate a great deal of solvency risk. Thus, we recommend the use of these EVA and CVA measures for evaluating performance of companies, especially, in transitional economies.

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