Finance and Credit

Application of the method of economic value added for motivation of top managers of corporation

Vol. 24, Iss. 1, JANUARY 2018

Received: 10 November 2017

Received in revised form: 24 November 2017

Accepted: 8 December 2017

Available online: 29 January 2018

Subject Heading: INVESTING

JEL Classification: D82, G34, M12

Pages: 52–64

Yashin S.N. National Research Lobachevsky State University of Nizhny Novgorod (UNN), Nizhny Novgorod, Russian Federation

Koshelev E.V. National Research Lobachevsky State University of Nizhny Novgorod (UNN), Nizhny Novgorod, Russian Federation

Kuptsov A.V. National Research Lobachevsky State University of Nizhny Novgorod (UNN), Nizhny Novgorod, Russian Federation

ORCID id: not available

Importance This paper considers if it is possible to apply the method of economic value added for constructive motivation of top-management of corporations.
Objectives The paper aims to adjust the known method of economic value added so that it could be used for successful motivation of the company's top managers.
Methods The proposed methodology is to apply the actual rate of modified economic value added instead of the usual economic value added. This allows the priorities of top managers and owners (shareholders) to be aligned with regard to which investment project from the set of available alternatives should be implemented.
Results Predictable modified economic value added, as well as net present value, does not provide a reliable guideline for rational motivation of the top manager for the long-term goals of the company. This problem can be solved by placing top-managers' remuneration in dependence on the actually obtained modified economic value added by years as a result of the implementation of a specific project. In this case, top managers of the company become structurally motivated to increase the value of the company's business, as required by the shareholders.
Conclusions and Relevance The results of the research can be useful to both financial analysts and corporate owners. They will help to focus the work of top managers on achieving long-term strategic goals of companies.

Keywords: top managers, economic value added


  1. Brigham E.F., Daves P.R. Intermediate Financial Management. 11th ed. South-Western College Publ., 2012, 1168 p.
  2. Ivanova M.O. [Improving the structure of the labor compensation of top managers in trade networks]. Kreativnaya ekonomika = Journal of Creative Economy, 2009, no. 7, pp. 100–105. (In Russ.)
  3. Kirillova M.M., Soboleva E.V. [Features of motivation of top managers]. Aktual'nye voprosy sovremennoi nauki = Topical Issues of Modern Science, 2013, no. 1, pp. 75–81. (In Russ.)
  4. Snimshchikova I.V., Chugaeva Yu.A. [Problems of motivation of top management in a corporate management system of the oil companies]. Vestnik Belgorodskogo universiteta kooperatsii, ekonomiki i prava = Vestnik of Belgorod University of Cooperation, Economics and Law, 2013, no. 2, pp. 136–140. (In Russ.)
  5. Damodaran A. Investment Valuation: Tools and Techniques for Determining the Value of Any Asset. New York, Wiley, 2012, 992 p.
  6. Kruschwitz L. Finanzierung und Investition. Munchen, Wien, R. Oldenbourg Verlag, 1999, 563 s.
  7. Levanova L.N. [Features of motivation of top-managers in Russia]. Izvestiya Saratovskogo universiteta. Novaya seriya. Seriya: ekonomika, upravlenie, pravo = Izv. Saratov Univ. (N.S.), Ser. Economics. Management. Law, 2017, vol. 17, iss. 1, pp. 50–55. (In Russ.) URL: Link
  8. Yashin S.N., Koshelev E.V., Kuptsov A.V., Podshibyakin D.V. Investitsionnoe planirovanie modernizatsii oborudovaniya proizvodstvennoi kompanii. Monografiya [Investment planning modernization of equipment manufacturing company: a monograph]. N. Novgorod, Pechatnaya masterskaya RADONEZh Publ., 2015, 202 p.
  9. Pogrebnaya E.V. [The incentive system for middle and top managers (Case study of a construction company)]. Liderstvo i menedzhment = Leadership and Management, 2016, vol. 3, no. 2, pp. 113–120. (In Russ.) URL: Link
  10. Limitovskii M.A. [Reputation, qualification and motivation as value drivers]. Rossiiskii zhurnal menedzhmenta = Russian Management Journal, 2009, vol. 7, no. 2, pp. 51–68. (In Russ.)
  11. Brigham E.F., Houston J.F. Fundamentals of Financial Management. 7th ed. Cengage Learning, 2011, 688 p.
  12. Roche J. The Value of Nothing: Mastering Business Valuations. Global Professional Publishing, 2005, 250 p.
  13. Voronina S.V. [Economic value added as instrument of management of the cost of the company]. Vestnik Yuzhno-Ural'skogo gosudarstvennogo universiteta. Seriya: ekonomika i menedzhment = Bulletin of SUSU. Series: Economics and Management, 2012, no. 22, pp. 6–10. (In Russ.)
  14. Salmanov O.N. [Economic value added v. discounted cash flow: Value-based management methods compared]. Servis v Rossii i za rubezhom = Service in Russia and Abroad, 2013, vol. 7, no. 9, pp. 82–91. (In Russ.) URL: Link
  15. Shipkova E.V. [The economic value added method in business valuation]. Voprosi Ocenki, 2012, no. 2, pp. 44–52. (In Russ.)
  16. Ivashkovskaya I.V., Kukina E.B., Penkina I.V. [Economic value added. Concepts. Approaches. Instruments]. Korporativnye finansy = Journal of Corporate Finance Research, 2010, no. 2, pp. 103–108. (In Russ.)
  17. Klochkova N.V., Ivanova O.E. [Economic value added as indicator of efficiency of functioning of energy companies]. Nauchno-tekhnicheskie vedomosti Sankt-Peterburgskogo gosudarstvennogo politekhnicheskogo universiteta. Ekonomicheskie nauki = St. Petersburg State Polytechnic University Journal. Economics, 2008, no. 2, pp. 118–123. (In Russ.)
  18. Kozyubro T.I. [The role of the indicator of economic value added in strategic planning on the example of wine-making industries]. Interaktivnaya nauka = Interactive Science, 2017, no. 5, pp. 121–123. (In Russ.) URL: Link

View all articles of issue


ISSN 2311-8709 (Online)
ISSN 2071-4688 (Print)

Journal current issue

Vol. 24, Iss. 9
September 2018