This article presents estimates of firm and industry fixed effects on profit rates for large US corporations, using Economic Value Added (EVA), the popular measure of profits produced by Stern Stewart & Co., and simple (unadjusted) accounting measures as the dependent variables. We find that the improvement in explanatory power of the fixed-effect model is substantially greater when using EVA than has been documented with alternative measures.
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Holian et al. (2010) studied this question.
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