Stewart, Stern

The first major attempt to evaluate the quality of business operating results was the Stern Stewart EVA computation, a proprietary complicated formula that can make up to 160 adjustments to reported earnings of public companies. A component of EVA is to determine a firm s net operating income after tax and while it may accomplish this objective, it has been criticized because it relies on data that, as stated earlier, can be managed (Brewer Chandra, 1999). It was more than a decade before Wall Street analysts accepted EVA, and today its use is widespread in the corporate world, but not as much as in the investment world. 

The strength of the OGI model is that it combines the rigor of Stern Stewart s EVA methodology, S P s Core Earnings methodology, Merrill Lynch s Cash Realization Test, and four additional tests into a new model that, we contend, extends the research in the space of organic growth. The cumulative effect of these tests is powerful... 

Our sample began with the top 1,000 economic-value-added (EVA) companies for 2002 based upon Stern Stewart s MVA database and methodology. We then eliminated banks, diversified financials, REITs, and insurance companies because of accounting and industry idiosyncrasies. 

Eor the economic value creation tests we used Stern Stewart s 2003 US EVA/MVA Annual 1000 ranking database. Eor all other computations, except the M A tests, we used Compustat. For the M A tests, we used the Securities Data Corporation (SDC) database provided by Thomson Financial. 

Many different samples and indices were considered and critiqued. We chose Stern Stewart s Market Value Added (MVA) database and its Economic Value Added (EVA) methodology because it is an independent attempt to adjust a company s reported financial results to determine who was really creating economic value for shareholders. 

Erom Stern Stewart s list of the top 1,000 MVA creators for 2002, we eliminated 138 companies classified as REITs, banks, diversified financials, or insurance companies by Global Industry Classification Standard codes. Thus, we began with 862 companies. 

For these companies, we used EVA (from Stern Stewart s database) created by each of these 862 firms for the years 1997-2002. To adjust for size bias, we then divided EVA for each year by the respective capital invested (again from Stern Stewart s database) - defined as the total equity and debt capital of a company. 

Boyd RA, Stern RH, Stewart BH, Wu X, Reyner EL, Zegarac EA, Randinitis EJ, Whitfield L. Atorvastatin coadministration may increase digoxin concentrations by inhibition of intestinal P-glycoprotein-mediated secretion. J Clin Pharmacol 2000 40(l) 91-8. 

Small, D. S., Acheampong, A., Reis, B., Stern, K., Stewart, W., Berdy, G., Epstein, R., Foerster, R., Forstot, L., and Tang-Liu, D. D.-S. (2002), Blood concentrations of cyclosporin A during long-term treatment with cyclosporin A ophthalmic emulsions in patients with moderate to severe dry eye disease, J. Ocul. Pharmacol. Then, 18, 411 118. 

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