Shareholder value creation of eva and traditional accounting measures – evidence from india

Abstract

In an era marked by globalization and rapid technological advancements, companies are striving to maintain relevance and sustainability in the market by exploring diverse business opportunities and implementing effective strategies. This study aims to investigate the value relevance of Economic Value Added (EVA) and Traditional Accounting Variables such as Earnings Per Share (EPS), Return on Assets (ROA), Return on Equity (ROE), and Profit After Tax (PAT) on Market Value Added (MVA). Focusing on manufacturing firms in the NIFTY Midcap 100 index from 2008-09 to 2019-20, the study employs panel data regression analysis based on the Easton and Harris Model (1991) and utilizes Gretl software for statistical analysis. The study uses panel data regression analysis to examine how EVA, Traditional Accounting Variables, and MVA relate, using financial data from 49 manufacturing firms in the NIFTY Midcap 100 over ten years. The Easton and Harris Model serves as the theoretical framework for the analysis, and Gretl software is utilized for statistical computations and modelling. The findings of this study shed light on the value relevance of EVA and Traditional Accounting Variables in explaining changes in MVA, serving as a measure of shareholder value. The study aims to provide insights into which metrics demonstrate a stronger correlation with MVA, thus offering valuable implications for shareholders, investors, and corporate decision-makers. The practical implications of this study extend to shareholders, investors, and corporate management. By understanding the value relevance of different performance metrics, stakeholders can make informed decisions regarding investment, strategic planning, and resource allocation. Moreover, this study contributes to the ongoing discourse on value-based management and its impact on shareholder value creation in the manufacturing sector. This study contributes to the existing literature by focusing on the value relevance of EVA and Traditional Accounting Variables specifically in the context of manufacturing companies within the NIFTY Midcap 100 index. The utilization of panel data regression analysis and the Easton and Harris Model adds methodological rigor and originality to the research, offering valuable insights for both academia and industry practitioners.