Erna van Duren

The relationship between economic value added and the stock market performance of agribusiness firms

This article examines the relationship between economic value added (EVA) and the stock market performance of 17 publicly traded companies in the Canadian food processing sector. The research is motivated by the increased popularity of EVA in corporate finance and by the claims that high EVA causes incremental gains in share price values. Using1996 annual reports to compute EVA, and daily stock prices for 1994 through 1998, we attempt to correlate EVA with a variety of measures including accounting return on assets (ROA), return on equity (ROE), share price, the Capital Asset Pricing Model (CAPM) returns and risk, and others. Results find little support for the conjecture that high-EVA firms lead to higher shareholder value, however, because the management logic that has popularized EVA is so logical and fundamental to common practices in corporate finance that we resist dismissing EVA as a valued paradigm. Rather, we suggest that market volatility and other factors mask the short-run increments to shareholder wealth from EVA-implemented strategies. lEconLit citations: G30, Q13.r

Agribusiness Competitiveness across National Boundaries

International competitiveness has become an extremely important topic in Canada. It is high on the political agenda because it is high on the economic agenda. It is particularly important for Canadas agri-food industry. The Canadian food sector evolved during the past half century behind a roughly 20% protective tariff wall, which is being removed by the Canada-U.S. Trade Agreement (CUSTA). The sector must adjust. While competitiveness is a major issue and topic of discussion, it has not been well defined or measured. Moreover, untangling the web of causality between elements of public policy, private management strategy, and the food industrys competitive state is fundamental. Thus, in this paper we develop a framework for assessing the competitive state of an industry. The objectives are to (a) develop a framework for assessing an industrys competitiveness, (b) report on the competitive state of five food-processing industries, and (c) assess the public policy implications that arise from application of the framework for these five industries.

The Role of Economic Analysis in Countervailing Duty Disputes: Cases Involving Agriculture

Several recent countervailing duty cases involving agricultural products have resulted in lively debate, and in some cases, additional political or legal action. This article examines whether several recent decisions involving agricultural products made under Canadian and U.S. countervailing duty law were consistent with economic theory, the GATT Subsidies Code and the relevant national lwa. On the basis of the analysis the article concludes that national trade laws, both in the U.S. and Canada, could be improved by explicitly incorporating an economic definition of a trade distorting domestic production subsidy, and an economic test for the causal link between a foreign subsidy and injury to a domestic industry.