Evaluation of sectors’ performance according to EVA: The case of the Czech Republic

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JEL classification

• Corporate Finance and Governance: General
• Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

Keywords

Economic value added, Financial performance, pyramidal decomposition

Abstract

This paper is dedicated to a financial performance analysis. Its aim is to analyse the financial performance of sectors of the Czech economy using economic value added (EVA) and, based on the results, to propose a pyramidal de-composition to quantify the indicators affecting EVA. The analysis considers the period from 2012 to 2019. Based on our findings, we identify the main divisions influencing the manufacturing sector and, respectively, the Czech economy. First, EVA is used to evaluate the financial performance of sectors of the Czech economy. The sectors are sorted according to the mean value of EVA. From our previous research, it is known that the manufacturing sector is the main driving force of the Czech economy. Then, the method of pyramidal decomposition is applied and the main component indicators affecting the EVA of the manufacturing sector are distinguished. The integral method is used to quantify the influence of the component indicators on EVA.