Market Value Added, usually the abbreviation MVA is used. It is a term that refers to the currently very important valuation measurement of the enterprise performance. MVA measures the difference between enterprise market value and value of the capital invested. It expresses the wealth of the owners (shareholders).
The indicator was created in 1993 by the American Consulting company Stern Stewart Management Services. The calculation is possible in two versions:
Ex ante: MVA = Present value of future results according to EVA - Economic Value Added
Ex post: MVA = Market value of the enterprise - Total paid-in capital
MVA > 0 - enterprise creates new value for the owners
MVA = 0 - amount invested returns without evaluation
MVA < 0 - there is a decline in the value of the enterprise
The aim of managers is to maximize MVA.
Illustration of positive MVA:
Illustration of negative MVA:
Use of the MVA in practice: MVA is used to measure the enterprise performance in the direction of maximizing shareholder’s value. MVA shows to owners how capable the management is. If MVA is positive, the management is able to create new value for owners. Conversely, if MVA is negative, the value of capital invested is reducing and the management has not been performing well.