Analyzing Impact of Economic Value Added as a Measure of Financial Performance on Share Price: A Case Study of Hindustan Unilever Limited

<i>Background:</i> Economic Value Added (EVA), introduced by Stern Value Management in 1983, is recognized as a robust performance measure that incorporates the cost of capital to evaluate true economic profit. Unlike traditional accounting indicators, EVA emphasizes shareholder value creation and provides insights into market valuation. This study investigates the impact of EVA on the share price of Hindustan Unilever Limited (HUL), one of India’s leading FMCG companies. <i>Methodology:</i> The study is based on secondary data spanning 2013-14 to 2023-24, obtained from HUL’s annual reports and verified through financial databases such as NSE, Yahoo Finance, and Moneycontrol. EVA was computed using NOPAT, ROIC, and WACC, while the average share price was derived from opening and closing values. Statistical analysis included correlation, simple linear regression, and ANOVA to determine the relationship between EVA and share price performance. <i>Results:</i> Findings reveal a positive and statistically significant association between EVA and HUL’s average share price. The correlation coefficient (R = 0.605) indicates a moderate positive relationship. Regression results (R² = 0.366, β = 0.482, p = 0.049) confirm EVA as a significant predictor, explaining nearly 37% of the variation in share price. Despite minor fluctuations in EVA during certain years, the overall trend of rising EVA parallels the consistent growth in HUL’s market valuation, underscoring its role in long-term value creation. <i>Conclusion:</i> EVA emerges as a reliable indicator of financial performance and shareholder value in the Indian context. The study highlights its practical utility for investors, analysts, and corporate decision-makers, reinforcing the importance of value-based measures over conventional accounting metrics in strategic financial planning and investment analysis.