Market Value Added (MVA)
Market Value Added (MVA) is a financial metric that measures the difference between the market value of a company’s equity and the capital contributed by investors. It reflects the company’s ability to create wealth for its shareholders. A positive MVA indicates that the company has generated value beyond the capital invested, while a negative MVA suggests that the company has destroyed shareholder value. MVA is often used to assess management’s effectiveness in generating returns.
Example
A company with a market value of $500 million and total invested capital of $400 million has an MVA of $100 million, indicating that it has added value for its shareholders.
Key points
• Measures the difference between a company’s market value and the capital contributed by investors.
• A positive MVA indicates that the company has created shareholder value, while a negative MVA suggests value destruction.
• Used to assess management’s effectiveness in generating returns for investors.
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