EVA VS TRADITIONAL ACCOUNTING MEASURES: A PRE RECESSION CASE STUDY OF SELECTED IT COMPANIES
Journal Title: International Journal of Marketing and Technology - Year 2012, Vol 2, Issue 6
Abstract
Purpose: The purpose of the study was to explain the explanatory power of EVA for shareholders value creation. The study provides empirical evidence on the relative and incremental information content of EVA and traditional performance measures, earnings, and cash flow. The inference from this paper is that IT companies should always try to maximize shareholders value. If this is not done then their stocks will not be able to stand in the market. This analysis helps us to dig below the surface numbers to tell us more about the underlying business and whether there is a prima facie case for using EVA as one of the range of performance measurement tools. The study focuses on Pre Recession time period. Design/methodology/approach: The sample of study comprises selected IT companies traded in the main NSE stock exchange. The sample selected for the study comprised of nine IT companies listed in NSE stock exchange from the period 2003-04 to 2007-08. This sample was selected on the basic of judgmental sampling technique. Cause and effect relationship between individual traditional measures as independent variable and EVA as dependent variable was established by linear regression method. A comparison of outcomes of previous studies with ours shows that significant results depend on finding the appropriate variables (stock prices versus stock returns) and the correct dynamics linking the dependent and the explanatory variable. Value of research: Till now, various researches have been done in this area. The overriding message of this research is that Information Technology companies must always strive to maximize shareholders value without which their stock can never use fancied by the market. This research will be helpful for all the investor investing in India Capital market. This research is an attempt to establish the cause and effect and relationship between EVA and other traditional tools. The evidence of the majority of the empirical studies regarding EVA suggests that there is a positive relationship between EVA and shareholder value creation. However, when the explaining power of EVA versus traditional performance measures regarding equity market value or returns is considered, the results are mixed. Thus an attempt will be made to find that shareholders wealth of the firm is largely positively associated with or driven by its EVA generating capacity in Indian context.
Authors and Affiliations
Dr Tarika Singh and Dr Seema Mehta
Application of Soft Computing Techniques to Prediction of Faulty Classes in Object Oriented Software
Estimating number of defects or predicting fault-proneness in object oriented software modules plays a key role in quality control of software products. Over the last few years, software quality has become one of the m...
Marketing of Nanobiogarments
The amalgamation of science and fashion lead to the emergence of “Nanobiogarments”. As the market is at its recession, the growth of apparel industry is burgeoning year by year. The market of India is also affected by...
INDIAN ECONOMIC POLICY – SOME ISSUES
As economists we have come a long way. In the early days of planning, allocation of resources seemed to be the most important intellectual problem, planning commission‟s various Five Year Plans and the publications of...
THE EFFECT OF ELECTRONIC BANKING ON CUSTOMER SERVICE DELIVERY IN NIGERIA
In recent times banking industry in Nigeria has undergone a full Business Process Re-engineering (BPR). There is a conspicuous change in mode of operations. Most basic business transactions are executed online. This st...
Investors’ attitude towards Post Office Deposits Schemes - Empirical Study in Udaipur district, Rajasthan
For more than 150 years, the Department of Posts (DoP) has been the backbone of the country’s communication and has played a vital role to connect the whole of the country and has also provided banking facilities in th...