Does Economic Profit Beat Earnings? Evidence from Brazil.

The purpose of this paper is to analyze if the Economic Profit (EP) better explains the Brazilian companies' market value than the Net Operating Profit After Taxes (NOPAT) or Net Income (NI). Therefore, it contributes to the debate on the superiority of Economic Value Added (EVA®) in explaining a company's value. The results indicate that the EP of the Brazilian companies analyzed from 2005 to 2008 is not comparatively better than the NOPAT or NI. This is a consistent result compared to those based on data from American, Japanese and Greek companies. [ABSTRACT FROM AUTHOR]