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Shareholder Value Creation in the Indian Banking Industry: An EVA Analysis

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  • G Soral
  • Shurveer S Bhanawat

Abstract

Economic Value Added (EVA) has received a lot of recognition as a measure of shareholder value creation. While the measure has been widely used for the purpose all over the world, many research studies have appeared to examine variety of issues related to EVA. An attempt has been made in this paper to revisit EVA-based analysis for the Indian Banking Industry. A Sample of 14 public sector and 12 private sector banks listed in Bombay Stock Exchange has been selected. The financial data of these sample units for four years, viz., 2003-04 to 2006-07, have been used for the analysis and comparison. Equity approach has been followed to compute EVA. Average EVA for all public sector banks under study for the whole period of analysis was found to be Rs. 774.57 cr. The corresponding figure for the private sector banks was Rs. 393.47 cr. This finding contradicts with that of some earlier researches (Parsuraman, 2000; and Thamy et al., 2000), which concluded that Indian banks do not create any value for their shareholders. The difference between the mean values of EVA for public sector and private sector banks, however, was not found significant (value of ‘t’ 0.0096

Suggested Citation

  • G Soral & Shurveer S Bhanawat, 2009. "Shareholder Value Creation in the Indian Banking Industry: An EVA Analysis," The IUP Journal of Accounting Research and Audit Practices, IUP Publications, vol. 0(3-4), pages 52-60, July-Octo.
    • Handle: RePEc:icf:icfjar:v:08:y:2009:i:3-4:p:52-60
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