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The Impact of Economic Value Added, Market Value Added and Traditional Accounting Measures on Shareholders¡¯ Value: Evidence from Jordanian Commercial Banks

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  • Hanan Ali Al-Awawdeh
  • Sa¡¯ad Abdul Kareem Al-Sakini

Abstract

The purpose of this is study is to test the impact of economic value added, market value added and traditional accounting measures on the shareholders’ value in the Jordanian commercial banks, based on a sample of 13 banks during the period 2010-2016. The study used the shareholders’ value as a dependent variable, while five independent variables were used, including Economic Value Added (EVA), Market value added (MVA), and three traditional accounting measures, namely; the rate of return on assets (ROA), rate of return on equity (ROE), and the Earning per share (EPS). The study found, by using the common regression analysis, that the rate of return on assets (ROA) and the economic value added (EVA) had a positive and statistically significant effect on maximizing the shareholders’ value, while the rest of the traditional accounting standards or the market added value had no any significant impact on shareholder’ value. The study concluded that traditional accounting standards are still constitute an important input for assessing shares, and maximizing the shareholders’ value along with modern performance assessment measures, especially economic value added. The study recommended that the performance assessment of banks should be based on two criteria- the rate of return on assets and the economic value added.

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  • Hanan Ali Al-Awawdeh & Sa¡¯ad Abdul Kareem Al-Sakini, 2018. "The Impact of Economic Value Added, Market Value Added and Traditional Accounting Measures on Shareholders¡¯ Value: Evidence from Jordanian Commercial Banks," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(10), pages 1-40, October.
    • Handle: RePEc:ibn:ijefaa:v:10:y:2018:i:10:p:40
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    References listed on IDEAS

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    1. Ahmed Magdy Fayed & Suchi Dubey, 2016. "An Empirical Study of Impact of EVA Momentum on the Shareholders Value Creation as Compared to Traditional Financial Performance Measures ¨C With Special Reference to the UAE," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(5), pages 23-38, May.
    2. Shrikant Krupasindhu Panigrahi & Yuserrie Zainuddin & Azzlina Azizan, 2014. "Comparing Traditional and Economic Performance Measures for Creating Shareholder’s Value: a Perspective from Malaysia," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(4), pages 280-289, October.
    3. Hamidreza Javadian Kootanaee & Akbar Javadian Kootanaee & Hamid Foladi Talari & K. Nagendra Babu, 2012. "A Comparison of Performance Measures for Finding the Best Measure of Business Entity Performance:Source from the Tehran Stock Exchange," Journal of Finance and Investment Analysis, SCIENPRESS Ltd, vol. 1(4), pages 1-3.
    4. Madan Lal Bhasin & Junaid M. Shaikh, 2013. "Economic value added and shareholders' wealth creation: the portrait of a developing Asian country," International Journal of Managerial and Financial Accounting, Inderscience Enterprises Ltd, vol. 5(2), pages 107-137.
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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