International Journal of Academic Research in Accounting, Finance and Management Sciences Vol. 4, No.4, October 2014, pp. 280–289 E-ISSN: 2225-8329, P-ISSN: 2308-0337 © 2014 HRMARS www.hrmars.com Comparing Traditional and Economic Performance Measures for CreatiŶg Shareholder’s Value: a Perspective froŵ Malaysia Shrikant Krupasindhu PANIGRAHI 1 Yuserrie ZAINUDDIN 2 Azzlina AZIZAN 3 1,2,3 Faculty of Industrial Management, University Malaysia Pahang, Kuantan, Malaysia 1 E-mail: shri16june@gmail.com, (Corresponding author) 2 E-mail: yuserrie@gmail.com, 3 E-mail: aazlinna@gmail.com Abstract This study investigates the importance of economic value added for the shareholders wealth maximization. Economic value added (EVA) is a value based performance measurement tool that inclines the agency conflict issues between managers and shareholders. Using a sample of 28 construction public listed companies in main board of Bursa Malaysia and using panel data with fixed effects during the period of 2003 to 2012, the findings of the study revealed that there is a positive and significant relationship ďetǁeeŶ EVA aŶd shareholder’s ǁealth ŵadži mization. The more the managers produce EVA, the ŵore shareholders’ ǁealth ŵadžiŵizatioŶ ǁill ďe Đreated. The fiŶdiŶg shoǁs significant support for EVA, but EVA was not reported by the companies and is not been used by investors for their investment decisions. Thus it is recommended for the ŵaŶagers to foĐus ŵore atteŶtioŶ to the Đriteria of EVA iŶ eǀaluatiŶg shareholder’s value. Key words EĐoŶoŵiĐ Value Added, tƌaditioŶal ŵeasuƌes, “haƌeholdeƌs ǁealth, ĐoŶstƌuĐtioŶ ĐoŵpaŶies, Malaysia DOI: 10.6007/IJARAFMS/v4-i4/1345 URL: http://dx.doi.org/10.6007/IJARAFMS/v4-i4/1345 1. Introduction It has been argued by shareholders often that directors never maximize the wealth of shareholders. The ŵaiŶ goal of ŵaŶageƌs is to atteŵpt to ŵadžiŵize shaƌeholdeƌs ǁealth. But soŵetiŵes the ŵaŶageƌs decisions favour the interest of non shareholders or stakeholders at the expense of shareholders (Mocsary, 2013). Thus it had become crucial for the shareholders to measure their value and take an effective investment decisions based on the financial performance of the firm and identify whether the firm cover the cost of capital. Furthermore, Irala et al. (2006) mentioned that managers are encouraged to uŶdeƌgo pƌojeĐts that Đould iŶĐƌease shaƌeholdeƌs ǁealth usiŶg ŵeasuƌeŵeŶt tools like eĐoŶoŵiĐ ǀalue added (EVA). There are traditional measures like earnings per share (EPS), dividend per share (DPS), return on equity (ROE), return on assets (ROA), and the like have been used by the shareholders to measure performance appraisals. Such traditional measures have been criticized due to not inclusion of cost of capital resources of the firm (Hasani and Fathi, 2012). Thus in order to overcome such issues economic value based measures like economic value added (EVA), Market Value Added (MVA), Cash Value Added (CVA) and Shareholder Value Added (SVA) were proposed (Al Mamun, Entebang, & Mansor, 2012; Erasmus, 2008).