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Research Paper | Finance | India | Volume 8 Issue 4, April 2019
Value Creation Measurements: An Industry Based Study in India
K. Kiran Kumar | VineethaVijayan
Abstract: Company management and financial analysts has a challenging task which is finding the best value creation measure for an industry and company. With regard to this very few studies lead to the conclusion that there isnt a unique indicator of value creation measurement by considering internal and external factors. Therefore, the study gives importance to find the best value creation measurement for an industry among selected value creation variables and traditional performance measure during the period 2009 to 2018. Value creation measures like Tobins Q (TQ), Enter price value to sales (EV/Sales) and Market value added (MVA) are considered as dependent variables and accounting based variables such as Earning per share (EPS), Return on Assets (ROA), Return on Net worth (RONW), Profit Before Exceptional Items (PBEI) and Net income (NI) are considered as independent variables. Therefore, the study sheds light on whether each industry has distinct set of variables determining shareholder value creation. In order to achieve this objective the results of the study proved that MVA is the best shareholder value measure than Tobins-Q and EV to sales. Furthermore, the results of this study reveals that each industry/sector has a specific shareholder value creation variable which explains the shareholder value for selected industries. EPS is the significant value creation measurement at 5 % significant level for Cement and Auto Mobile Industry whereas EPS is the value creation measure but has a negative significant level in Pharmaceutical industry. For the banking sector, RONW is the value creation measure. The study found that each industry have a distinctive set of variables determining its shareholder value creation. However, it can be seen that EPS is the most significant variable and bench mark for selected industries for creating value to their shareholders.
Keywords: MVA, EV to sales, Tobins-Q, EPS, ROA, RONW, PBEIT and NI, R2 and Linear Regression
Edition: Volume 8 Issue 4, April 2019,
Pages: 1120 - 1123