DOCSLIB.ORG

Analysis of Financial Performance Using Market Value Added Approach

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Analysis of Financial Performance Using Market Value Added Approach Volume : 3 | Issue : 1 | Jan 2014 ISSN - 2250-1991 Research Paper Commerce Analysis of Financial Performance Using Market Value Added Approach * Dr.K.NIRMAL KUMAR REDDY t * Department of Commerce, SV University, Tirupathi. ABSTRACT Market Value Added Approach to the mix of various components in the Financial Performance. The present paper is an attempt to study Financial performance using and its impact on Market Value Added Approach in select software companies in South India. In South India there are 20 software companies that are listed in Bombay Stock exchange. Out of these 10 companies were purposively chosen to study the Market value Added of the individual companies and its impact on Market Value Added of the said companies. The companies selected are HEXAWARE TECHNOLOGIES LTD, MICRO TECHNOLOGIES (INDIA) LTD, KPIT CUMMINS INFOSYSTEMS LIMITED, ZENSAR TECH, INFOTECH ENTERPRISES LTD, CMC LTD, WIPRO LTD, TATA ELXSI, POLARIS LAB LTD, and FINANCIAL TECHNOLOGIES (INDIA) LTD for a period of ten years from 2002 to 2011. The MVA and seven independent variables were calculated for all the companies. MVA refers to the value added to the share holders’ wealth by the firm. If MVA is positive, it implies that the firm added value to the shareholders’ wealth. If negative it indicates that the firm is destroying the shareholders’ wealth. The MVA is positive in the case of all the companies is good. So the performance of these companies is satisfactory Keywords : 1. INTRODUCTION its market capitalization. The book value of the firm is equity One of the external indicators that gives the utmost satisfac- share capital plus reserves and surplus, minus any revalua- tion to the investors is share price and, truly speaking, the tion reserve and miscellaneous expenses. Market value of Market Value Added. From the investors’ view point, the in- the firm can be determined dividing Earning Before Interest vestor is always interested in increase in the share prices. The and Taxes (EBIT) by weighted average cost of capital. most reliable measure of management’s long – run success in adding value is known as “Market Value Added” (MVA). Market value Added = Market value of the firm- MVP is the difference between company’s current market Book value of the firm value as determined by its stock price and economic book value. Economic value of the company can be determined EBIT as the amount of capital that shareholders have committed Market value of the firm = ---------- to the firm throughout its existence, including earnings that Ko have been retained in the business. MVA is the best external performance measure as it indicates the market assessment Where Ko = Weighted Average Cost of Capital. of the effectiveness with which a company’s managers have used the scarce resources under their control. Hence, it is Book value of the firm = Equity share capital + Reserves and very significant and important to analyze and identify the in- surplus – Revaluation reserves – mi ternal indicators that are related to with Market Value Added. cellaneous expenses. 1.1 MARKET VALUE ADDED APPROACH 1.1.2 Return on Net worth The present study is undertaken to examine the effect of se- It can be derived by profit after taxes (PAT) minus preference lected variables on MVA. Thus, the objective of the study is share dividend divided by average net worth. to know one of the internal measures, which can influence the MVA. Here, MVA is taken as a dependent variable and the PAT – Preference share dividend seven other variables are selected as independent variables. RONW = ----------------------------------------------- The independent variables chosen in this study are: Average Net worth Return on Net Worth 1.1.3 Capital Productivity Capital productivity Value added is net sales plus changes in stocks minus raw Earnings Per Share material consumed and power and fuel cost. Capital is treat- Economic Value Added ed as net fixed assets. This is considering the fact that effi- Return on Sales cient utilization of assets is the sine qua non for improving the Return on Total Assets. productivity. Thus Cash Profit. Value added One year period has been taken i.e. from 01-04-2010 to 31- Capital productivity = ------------------- 03-2011, for computing the above variables and also for anal- Capital ysis. A brief description of each variable is given below. 1.1.4 Earning Per Share 1.1.1 Market Value Added (MVA) It can be derived by dividing net profit after taxes and prefer- MVA is derived by deduction the book value of the firm from ence dividend by the number of common shares i.e., 141 X PARIPEX - INDIAN JOURNAL OF RESEARCH Volume : 3 | Issue : 1 | Jan 2014 ISSN - 2250-1991 (EBIT – I) (1 - t) – PD and debt. WACC is the combination of cost of equity, cost of EPS = -------------------------------- preference share capital and cost of debt. N 1.1.6 Return on Sales Where, PBIT Return on sales = ------------- EBIT = Profit before interest and taxes Sales I = Interest t = Tax rate 1.1.7 Return on Total Assets PD = Preference dividend This gives productivity of all taken together. This is consid- N = Number of Common Shares outstanding ered on after tax basis. 1.1.5 Economic Value Added (EVA) PBIT – Tax provision For the purpose of analysis, EVA is derived as follows: Return on Total Assets = -------------------------------------- Total Assets EVA = (r – c) x Invested capital 1.1.8 Cash Profit Cash profit is derived as profit after taxes plus depreciation NOPAT Cost of capital plus expenses amortized. r = -------------------------, c = --------------------- Invested capital Invested capital The results of the MVA and other seven independent varia- bles for select software Companies in south India as on 31- For derivation of Weighted Average Cost of Capital (WACC), 03-2011 are presented in Table 1.1. invested capital is divided into three parts, equity, preference 1.1 MARKET VALUE ADDED AND OTHER INDEPENDENT VARIABLES OF SELECT SOFTWARE COMPANIES AS ON 31-03-2011 S.NO. ITEMS HEXAWARE MICRO KPIT ZENSAR INFOTECH CMC WIPRO TATA POLARIS FINANCE 1 MVA* 3197.5 1104 8302.5 1478.5 3116 20695.5 23815 2441 3677 43245 2 RONW 0.42 0.27 0.24 0.4 0.22 0.7 0.41 0.17 0.06 -0.27 3 CAP 2.56 1.79 2.41 2.08 1.9 6.26 3.12 2.48 2.36 0.8 4 EPS 9.13 57.71 11.78 30.47 12.56 118.42 21.72 10.44 20.43 29.69 5 EVA* 4.16 0.27 0.67 0.45 2.19 11.22 0.91 0.41 3.48 -0.19 6 ROS 0.21 0.17 0.11 0.13 0.13 0.19 0.2 0.08 0.02 -0.54 7 ROTA 0.43 0.24 0.21 0.21 0.19 0.91 0.62 0.25 -0.02 -0.48 8 C P* 0.2 0.22 0.13 0.14 0.15 0.18 0.2 0.12 0.19 -0.41 Rupees in Crores. Source: Compiled from the annual reports of sample It is inferred from the above analysis that seven variables like companies. RONW, CAP, EPS, EVA, ROS, ROTA and Cash Profit are The Market Value Added (MVA) and other seven independent found to have significant effect on MVA. variables such as Return on Net worth (RONW), Capital Produc- tivity (CAP), Earning Per Share (EPS), Economic Value Added Further, an attempt is also made to examine the relative finan- (EVA), Return On Sales (ROS), Return On Total Assets (ROTA) cial performance of select software companies in south India and Cash Profit (CP) of all the companies are calculated. for the period of ten years from 2001-02 to 2010-11 in terms of profitability, leverage and liquidity. The data has been se- Market value added refers to the value added to the share lected from Annual Reports of select Software companies in holders’ wealth by the firm for the period 31-03-2011. If market South India. The following twenty two financial ratios have value added is positive, it implies that the firm added value to been used as variables or inputs in the analysis. the shareholders’ wealth. If market value is negative, it indi- cates that the firm is destroying the shareholders’ wealth. The market value added is positive in the case of all the compa- nies. Therefore, the performance of all the companies is good. Hence, the performance of all companies is satisfactory. Regressions are run of MVA on seven variables mentioned above individually to examine the effect of each variable on MVA. The results are shown in Table 1.2. Table 1.2 REGRESSIONS OF MVA ON SELECT INDE- PENDENT VARIABLES S.No. Variable R R2 t- value 1. Return on Net Worth 0.311 0.009 -0.09* 2. Capital Productivity 0.034 0.0012 0.092* 3. Earning per share 0.211 0.044 0.571* 4. Economic Value Added 0.968 0.0093 0.257* 5. Return on Sales 0.697 0.487 -2.578* 6. Return on Total Assets 0.207 0.043 -0.562* 7. Cash Profits 0.765 0.586 -3.148* NS : Not Significant * Significant at 1 % level. ** Significant at 5 % level. 142 X PARIPEX - INDIAN JOURNAL OF RESEARCH Volume : 3 | Issue : 1 | Jan 2014 ISSN - 2250-1991 software company separately. The average ratios of ten soft- ware companies in south India are shown in Table 1.3. Gross profit ratio is the ratio of gross profit to net sales and expressed as a percentage. It reveals the amount of gross profit for each rupee of sale. The higher the ratio, the greater will be the margin.
Load more

Recommended publications
  • Underwriting Guidelines and Policy Insurance Risk Management For
    UNEP e-Learning Course on Insurance Risk Management for Renewable Energy Projects Module 3 – Underwriting Guidelines and Policy UNEP e-Learning Course on Risk Management Instruments for Renewable Energy Projects Module 3- Underwriting Guidelines and Policy Overview The training is organized in 6 modules and fits into a two day training schedule: Module Main Content Length of Module 1 – Climate Change Briefing, policy frameworks and 2 hours business impact 2 – Renewable Energy Technologies Renewable Energy technologies 3 hours and Risks policy, investment trends and risks 3 – Underwriting Guidelines and Underwriting information, 5 hours policy guidelines, risk evaluation, coverage evaluation 4 – Claims handling and policy Claims information, management, 2 hours reserving, legal and payment 5 – Intermediaries and networks Project development, information 1 hour and consultation 6 – Case study Renewable Energy case study, 3 hours risk assessment, impact and suitability of instruments Total 16 hours Page 1 Module 3- Underwriting Guidelines and Policy Module 3 Contents Objectives Introduction Lesson Core o Section 1 – Basic Underwriting Principles o Section 2 – Basic Insurance Product Offerings for RET o Section 3 – Basic Underwriting Processes and Guidelines o Section 4 – Risks and Barriers in RET Underwriting o Section 5 – Wind Power Considerations o Section 6 – Hydro Power Considerations o Section 7 – Solar Power Considerations o Section 8 – Biomass Power Considerations Lesson Review Further Reading & Related Links Examination Lesson Objectives Underwriting principles To provide an overview of the basic underwriting principles and guidelines that are considered in the context of insurance underwriting. Insurance availability To explain the main insurance offerings for RET. Specific consideration To describe specific considerations for the four primary RET: for RET wind, hydro, solar and biomass.
    [Show full text]
  • Impact of Operating Profit and Capital Charge on Economic Value Added and Analysing Market Value Added
    International Journal of Latest Technology in Engineering, Management & Applied Science (IJLTEMAS) Volume VII, Issue IX, September 2018 | ISSN 2278-2540 Impact of Operating Profit and Capital Charge on Economic Value Added and Analysing Market Value Added Prof. Prayag Gokhale1, Ashwini Kamate2 1Assistant Professor Department of MBA, KLE Dr. MSSCET, Belgaum, Karnataka, India 2Student of MBA, Department of MBA, KLE Dr. MSSCET, Belgaum, Karnataka, India Abstract: - This study examines the Economic Value Added The approach of MVA quantifies the modification in the (EVA) and Market Value Added (MVA) which are two different market value of the firm’s equity capital with regard to equity approaches. EVA is a measure of firm’s profitable yield where it fund. This approach is only applicable to the firms which are implied the gap between operating profits after taxes and total listed in stock exchange hence it has limited application. If the cost of capital. Since WACC takes care of financial costs of all result is positive, the company has produced shareholder’s sources of investor’s funds in a corporate, it is spectacular that profits after taxes should be considered to quantify EVA. The wealth and management is capable of creating a new value for approach of MVA quantifies the modification in the market owners. MVA shows the firm owners that a capacity of the value of the firm’s equity capital with regard to equity fund. This management. In opposite if MVA is negative the capital consists of meaning, calculation and analysing of EVA and MVA invested is reducing due to this the company is not performing in a sugar company.
    [Show full text]
  • Jurnal Politeknik Caltex Riau
    Jurnal Akuntansi Keuangan dan Bisnis Vol. 11, No. 2, November 2018, 87-96 87 Jurnal Politeknik Caltex Riau http://jurnal.pcr.ac.id The Effect of Financial Performance and Company Size on The Indonesian Sharia Stocks Eva Nurlita1 dan Robiyanto Robiyanto2 1Universitas Kristen Satya Wacana, email: [email protected] 2 Universitas Kristen Satya Wacana, email: [email protected] Abstract There are new alternatives that measure performance based on value and are still rarely used specifically in stocks based on Islamic law. This study aims to find and obtain empirical evidence concerning the influence of Economic Value Added (EVA), Market Value Added (MVA), Financial Value Added (FVA) and the size of the company to the stock price of sharia companies listed in the Jakarta Islamic Index period 2014-2016. By using purposive sampling, obtained sample of 13 sharia stocks observed in annual period, hence obtained panel data as much as 39. Data analyzed by using multiple regression. The results showed that Market Value Added has a significant positive effect on stock prices. EVA, FVA, and firm size have no significant effect on stock prices. Keywords: Economic Value Added (EVA); Market Value Added (MVA); Financial Value Added (FVA); Jakarta Islamic Index (JII) 1. Introduction Capital market growth in Indonesia attracts companies to make the capital market as a source of working capital, business expansion, and product diversification. Companies prefer capital market as a means to obtain sources of funds in the development of the company. Many companies are interested for Initial Public Offering (IPO) on Indonesia Stock Exchange to sell the company’s ownership to the public.
    [Show full text]
  • Finance in a Nutshell a More Comprehensive “Javier Estrada Delivers the Essential Concepts and Tools of Modern Finance Clearly and Concisely
    0273675400_COVER 5/7/05 10:08 am Page 1 FINANCE About the author Javier Estrada holds an M.S. in Finance and a Ph.D. in Economics FINANCE both from the University of Illinois at Urbana-Champaign. He is FINANCE currently an associate professor at the IESE Business School in Barcelona, Spain; the co-editor of the Emerging Markets Review; IN A NUTSHELL and a wealth management advisor at Sports Global Consulting. He IN A NUTSHELL has published extensively in international journals, written many FINANCE cases for class discussion, and lectured throughout the world to This is a no-nonsense companion to working with the undergraduate students, graduate students, and executives. A no-nonsense companion to the tools of finance. tools and techniques of finance Sometimes even the best professionals have long forgotten some key IN A NUTSHELL IN A NUTSHELL financial concepts, and others may never have learned them properly in the first place. Some want to broaden the scope of their financial The author has prepared some useful tools and supporting data knowledge, and many more simply need a desktop companion for sets to help make Finance in a Nutshell a more comprehensive “Javier Estrada delivers the essential concepts and tools of modern finance clearly and concisely. Estrada avoids quick and practical help with the tools and techniques of finance. companion for those who wish to explore these concepts further. abstract symbolism and jargon, and instead relies on insightful, practical examples, making this the perfect book for A no-nonsense companion to the You can find them at: www.pearsoned.co.uk/estrada practitioners who seek an efficient and engaging learning experience.
    [Show full text]
  • Pengaruh Kepemilikan Pemerintah Dan Publik Terhadap Economic
    International Business & Economics Research Journal – July 2009 Volume 8, Number 7 The Value Of The State-Owned Enterprises In Indonesia: A Case Study Of Privatization Sri Hasnawati, Lampung University of Indonesia and Atma Jaya Catholic University of Indonesia ABSTRACT This research aims to test the impact of the ownership structure toward the performance of the State- Owned Enterprises (SOEs). It examines the relationship between the performance of the SOEs and the market value. The study involves 13 SOEs listed at the Jakarta Stock Exchange. Of the 13 SOEs, 9 were selected as samples. The performance of the SOEs is measured by means of the EVA (Economic Value Added) indicator and the market value by the MVA (Market Value Added) indicator. The result of the study reveals that the ownership structure does not have an impact on the performance of the SOEs, either partially or simultaneously. To a smaller degree, the study also indicates that there is a relationship between the EVA and the MVA. The implication of this study is that the privatization of the SOEs should not fully be used to help with the state budget deficit. That is, the majority of the funds should be allocated for the purpose of developing or expanding the SOEs themselves so that they can perform optimally for the sake of society. Furthermore, the SOEs should be well-managed if they would like to obtain good responses from the market. Keywords: ownership stucture, performance of SOEs, market value, EVA, MVA. INTRODUCTION he State Owned Enterprise (SOE) is one of the institutions managed by the state to achieve and improve the prosperity for the public.
    [Show full text]
  • Evaluating the Relationship Between Economic Value Added and Capital Structure in Companies Listed at Tehran Stock Exchange
    © 2014, ISSN: 2322-4770 Science-Line Publication Journal of Educational and Management Studies www.science-line.com J. Educ. Manage. Stud., 4(4): 758-762, 2014 JEMS Evaluating the Relationship between Economic Value Added and Capital Structure in Companies Listed at Tehran Stock Exchange 1 2 3 Atabak Baybordi , Ehsan Kermani , Esmaeel Farzaneh Kargar * 1. Department of Accounting, Urmia Branch, Islamic Azad University, Urmia, Iran 2. Young Researchers Club, Dariun Branch, Islamic Azad University, Dariun, Iran 3. Department of Business Management and Customs, Hormozgan University, Iran *Corresponding author’s Email: [email protected] ABSTRACT: Maximization of wealth is the major purpose of a business unit. Nowadays, economic value added is considered to be the most important criterion for evaluation of internal performance. On the other hand, as discussed in ORIGINAL ARTICLE Accepted Accepted capital structure, capital is the first fundamental necessity for establishing a company and is needed for further Received developments. Thus, the present study aims at evaluating the relationship between economic value added and capital structure of companies listed at Tehran Stock Exchange from 2004 to 2010. The samples are chosen by the use of systematic elimination method and include 70 companies. In the present study, value added as the dependent variable 2 1 1 3 is a measure used for of assessing value-making in companies. Capital structure is the independent variable comprising Sep Jun rate of short-term liability, rate of long-term liability, and return on equity. Thus, three hypotheses are proposed for . 201 . explaining the relationship between value added and elements of capital structure.
    [Show full text]
  • Value Creation Through Mergers and Acquisitions Empirical Evidence from Acquirers in a Nordic Context
    Value creation through mergers and acquisitions Empirical evidence from acquirers in a Nordic context Master’s thesis Martin Andersen Rasmus Davidsen Rejnhardt Student number: 58059 Student number: 82822 Cand.merc.FIR Cand.merc.FSM Frederiksberg, 15 May 2018 Supervisor: Christian Aarosin Department of Accounting and Auditing No. of standard pages (characters): 120 pages (272,283/273,000) Copenhagen Business School Abstract In this thesis, we investigate whether acquiring companies within Denmark, Finland, Norway and Sweden create short-term shareholder value when announcing acquisitions. Firstly, we discuss what value creation is and how it should be measured. After comparing a multitude of income and value metrics, we conclude that abnormal returns are the relevant definition and measure. We next identify and test a series of deal, company and other economic drivers behind value creation. The seven drivers we investigate are: 1) the effects from companies with high cash flows; 2) acquisitions within merger waves; 3) the effect from previous multiple acquisitions within a short time span; 4) effects from the use of financial advisers; 5) cross-border acquisitions; 6) the effect from payment methods; and 7) strategic rationales and motives behind acquisitions. We compile a unique dataset from several reputable data sources using a strict sampling procedure, resulting in a final sample of 627 acquisition announcements from 1995 to the beginning of 2018. The sample is analysed using two methods. Firstly, we use an event study as our primary method. In the event study, we observe and make corrections in the data to address problems related to e.g. thin trading and clustering.
    [Show full text]
  • Does Franchising Create Value? an Analysis of the Financial Performance of Us Public Restaurant Firms
    DOES FRANCHISING CREATE VALUE? AN ANALYSIS OF THE FINANCIAL PERFORMANCE OF US PUBLIC RESTAURANT FIRMS E. Hachemi Aliouche, Ph.D. The William Rosenberg International Center of Franchising, University of New Hampshire and School of Business, Southern New Hampshire University Udo Schlentrich, Ph.D. The William Rosenberg International Center of Franchising, University of New Hampshire CONTACT: E. Hachemi Aliouche, Ph.D. William Rosenberg International Center of Franchising University of New Hampshire McConnell Hall, Room 217E Durham, NH 03824 Email: [email protected] Website: http://franchising.unh.edu Phone: 603-862-6455 Fax: 603-862-3383 1 DOES FRANCHISING CREATE VALUE? AN ANALYSIS OF THE FINANCIAL PERFORMANCE OF US PUBLIC RESTAURANT FIRMS Executive Summary: It is commonly believed that the franchising method of distribution provides strategic and operational benefits to the companies that adopt it. These benefits should result in superior financial performance as compared to that of firms that do not use franchising. Yet, the empirical evidence of the effects of franchising on financial performance is sparse and mixed. The purpose of this paper is to further examine the empirical evidence of the impact of franchising on a firm’s financial performance by using performance metrics (Economic Value Added and Market Value Added) that are extensively used in corporate finance. This study focuses on the US public restaurant sector. The results provide some evidence that franchising firms create more market and economic value than do non-franchising firms. Key words: Franchising, Financial Performance, Restaurant Sector, Economic Value Added, Market Value Added. 2 DOES FRANCHISING CREATE VALUE? AN ANALYSIS OF THE FINANCIAL PERFORMANCE OF US PUBLIC RESTAURANT FIRMS INTRODUCTION Franchising has grown so fast since the 1950s that it is now pervasive in the US economy.
    [Show full text]
  • The Measurement of Post-Acquisition Performance in Rsa Using Economic Value Added (Eva)
    THE MEASUREMENT OF POST-ACQUISITION PERFORMANCE IN RSA USING ECONOMIC VALUE ADDED (EVA) A research paper submitted by Amos Tlali Makhele Student number: 689500 Proposed Supervisor: Dr. Thabang Mokoaleli-Mokoteli Wits Business School May 2013 DECLARATION I, Amos Makhele, hereby declare that the work presented herein is genuine work done originally by me and has not been published or submitted elsewhere for the requirement of a Master in Management of Finance and Investment degree at the Wits business school (WBS). Any literature, data, or works done by others and cited within this report has been given due acknowledgement and listed in the reference section. I further declare that I was given authorization by a panel from the research committee of the WBS to carry out this research. Signed: May 2013 1 ABSTRACT This study re-examines post-acquisition performance of acquiring firms in South Africa using Economic Value Add (EVA). Investigation of the 336 acquisitions occurring during 2000 to 2011 reveals that acquiring firms experience significantly deteriorating EVA after the completion of acquisitions. Further, this study evaluates the performance of other traditional accounting measures including Earning per share (EPS), Return on capital (ROC), Return of Assets (ROA) and Return on Equity (ROE) post acquisition. The results suggest that acquiring firms tend to experience slightly improved performance after completion of the acquisitions when using traditional accounting measures. But the improved operating performance is wiped out by capital costs of the large premiums paid to the target firm, creating no real economic gains to the acquiring firm‘s shareholders 2 ACKNOWLEDGEMENTS I take this opportunity to express my profound gratitude and deep regards to my supervisor Dr.
    [Show full text]
  • A Fresh Look at Economic Value Added: Empirical Study of the Fortune Five-Hundred Companies Adnan M
    The Journal of Applied Business Research Volume 18, Number 2 A Fresh Look At Economic Value Added: Empirical Study Of The Fortune Five-Hundred Companies Adnan M. Abdeen, (Email: [email protected]), California State University, Los Angeles G. Timothy Haight, (Email: [email protected]), California State University, Los Angeles Abstract Rapid and complex changes in the economic and business environment are posing serious challenges to today’s business executives. Meeting these challenges requires effective measures for control and performance evaluation. This article focuses on the uses, benefits and limitations of economic value added (EVA) as a value creation measure. Calculation of this trendy measure is complicated because of the many adjustments needed to convert the generally accepted accounting principles (GAAP) based income to economic income. The article compares the performance of EVA user companies with non-user Fortune 500 companies for the years 1997 and 1998. It shows that users performance means profits as percentage of revenues, assets, and stockholders’ equity were higher than the means of non-users. However, the means for 1998 earnings per share (EPS), EPS change from 1997 and EPS growth for the years 1988-1998 were lower for the EVA user companies. EVA will become less popular in its use as an instrument of control and performance evaluation. Therefore, the conclusion of this research is not in support of EVA use as a measure of value creation to stockholders. Introduction he economic and business environments have changed dramatically during the last few years. Business executives are faced with an increasingly competitive and complex environment. The need for creative T leadership to handle the new developments in global business, technology, mergers, E-commerce and in- novations is accelerating.
    [Show full text]
  • The Analysis of Financial Performance Using Economic Value Added (Eva) and Market Value Added (Mva) Methods and Its Influence On
    Scientific Journal of Reflection: p-ISSN 2615-3009 Economic, Accounting, Management and Bussines e-ISSN 2621-3389 Vol. 1, No. 3, Juli 2018 THE ANALYSIS OF FINANCIAL PERFORMANCE USING ECONOMIC VALUE ADDED (EVA) AND MARKET VALUE ADDED (MVA) METHODS AND ITS INFLUENCE ON STOCK RETURN OF TRANSPORTATION COMPANY LISTED IN INDONESIA STOCK EXCHANGE Lia Ira Sahara Pamulang University, Banten [email protected] ABSTRACT This study was conducted to examine the effect of Economic Value Added (EVA) and Market Value Added (MVA) and Its Effect on Stock Return. The research sam- ple was taken from 5 transport company listed on the Indonesia Stock Exchange that have been through the process in accordance with the criteria of sample or random sampling method. Data analysis methods used in the study panel data analysis method using Eviews program. Results showed partial EVA has no real effect, with significant values of 0.2661, while MVA and significant influence on Return Stocks with significant value of 0.0463 as indicated by the results of the test statistic t. While simultaneously or jointly Economic Value Added (EVA) and Market Value Added (MVA) influence on Stock Return, this is evidenced by the results of the test statistic f the significant value of 0.0382. Keywords: Economic Value Added (EVA), Market Value Added (MVA), Stock Return, Transportation Company PROEM In investment activities, capital market is one means for investors to invest. Investors in making decisions to invest funds in the capital market, first assess the financial performance of the company that will be a place to invest. By conducting a performance appraisal, information about the company's financial condition and posi- tion will be obtained.
    [Show full text]
  • Economic Value Added * Dr. Kishor V. Bhesaniya
    Volume : 1 | Issue : 4 | April 2012 ISSN - 2250-1991 Research Paper Commerce Economic Value Added * Dr. Kishor V. Bhesaniya * Lecturer, Shree A.R.S. Sakhida Arts & C.C. Gediwala Commerce College, Limbadi ABSTRACT The goal of all companies is to maximize the shareholder’s value. The shareholder’s wealth is measured by the returns they receive on their investment. Returns are in two parts, first is in the form of dividends and the second in the form of capital appreciation reflected in market value of shares. Currently investors world are demanding shareholder’s value than just high returns. In India, the concept of shareholder value is gaining ground, particularly after the liberalization on foreign holdings in Indian companies. Foreign institutional investors emphasized and demanded focus on shareholder’s value then other parameters. The shareholder’s activism reached an unforeseen level in the United States in the 1980s. Investors in Europe have also increased the pressure on companies to maximize shareholder value .The New York based Financial advisory Stern Stewart and Co. postulated a concept of economic income in 1990 in the name of ‘Economic Value Added’. EVA is a modified version of residual income concept. EVA has provided financial discipline in many U.S. companies and encouraged managers to act like owners and boosted shareholder’s returns and the value of their companies. In the present article an attempt has been made to discuss the various aspects of Economic Value Added viz, Evolution of Economic Value Added, what is EVA, How to calculate EVA, difference between EVA and net income, when EVA increased and decreased, Limitations of EVA, Importance of EVA and Functions of EVA.
    [Show full text]