Created Shareholder Value (CSV):
On comparison of the traditional and modern parameters of measuring shareholders wealth creation. It is identified that the modern parameters are superior over the traditional parameters of measuring shareholders wealth creation. There is a need for revision and reforms due to the superiority of the modern parameters over the traditional parameters of measuring shareholders wealth creation. The corporate have to view shareholders not merely as a part-owner, who is a supplier of finance and share capital as merely a source of finance
but have to shift their paradigm towards shareholders being the true owner of a corporate firm and to run the corporate firm with an ultimate objective of achieving shareholders wealth creation. Today EVA is not a mandatory part of financial reporting and hence it does not form a part of annual reports. Due to the increasing importance of EVA in future it should form a part of mandatory accounting information reported through annual reports.
“Until a business returns a profit that is greater than its cost of capital, it operates at a loss…. The enterprise still returns less to the economy than it devours in resources… Until then it does not create wealth; it destroys it”
-Peter Drucker
In the field of corporate finance, economic value added is a way to determine the value created, above the required return, for the shareholders of a company. Shareholders of the company will receive a positive value added when the return from the capital employed in the business operations is greater than the cost of that capital. On comparison of the traditional and modern parameters of measuring shareholders wealth creation. There is a need for revision and reforms required in the parameters of measuring shareholders wealth creation due to the superiority of the modern parameters over the traditional parameters measuring shareholders wealth creation. The corporate have to view shareholders not merely a source of finance but have to shift their paradigm towards shareholders being the true owner of a corporate firm and to run the corporate firm with an ultimate objective of achieving shareholders wealth creation. Today EVA is not a mandatory part of financial reporting and hence it does not form a part of annual reports. Due to the increasing importance of EVA in future it should form a part of mandatory accounting information reported through annual reports.
