Thus, These new form of financing combine with the need to create new ways to incentive management, has created the new EVA. This is a System based in a performance measure, in simple words; the EVA measures the profitability of the investment done by shareholders in a company, against any other equity opportunity in the market.
As Breadley & Meyer set in their book, "A perfect System of corporate governance would give managers all rights incentives to make value-maximizing investment and financing decision". Therefore the EVA, look for incentives a good manager performance in order to guarantee that the cash will be paid out to investor after a run out of positives NPV projects instead of wasteful investment, managers perquisites or private benefit.
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