A Study of Factors Driving Shareholders' Value
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A Study of Factors Driving Shareholders’ Value and Influencing Sensex Fluctuation In India
Executive Summary
The objective of this project is to analyze the most important factors which drive shareholders, value. Shareholders’ value here refers to the MVA (market value added) which means the additional value which shareholders are earning on their invested money. The performance of a company matters a lot in creating a positive image of that company in front of its stakeholders. Moreover, the main objective of a company is to maximize the shareholders’ value. So, shareholders always want to know that the Company with whom they have entrusted their hard earned money is efficiently utilizing it and thus, creating Value for them. We have always read the annual report of the Companies to find out information about their “top line” and “bottom line”. We also have various financial ratios and terms which act as essential factors to consider for our aid like Return on Capital Employed (ROCE), Return on Net worth (RONW), Earning per Share (EPS), Dividend per Share (DPS), Debt Equity Ratio (D/E Ratio) and Economic Value Added (EVA).
This research is an attempt to find out whether EVA, DPS, D/E Ratio, EPS, ROCE, RONW of the companies listed in sensex really explains the value accretion for the shareholders and cause fluctuation in sensex. So, I have taken these variables as Independent variables and MVA as a dependent Variable (shareholders’ value) to apply regression analysis to come out with a result that which variable is having a high degree of Correlation with MVA and significantly explains variation in MVA.
To perform this analysis secondary data has been collected from Prowess and www.bseindia.com
Out of 30 companies listed in sensex, 23 companies are selected as sample. 7 companies are eliminated because of inadequate information available for these companies. The reason behind choosing these companies is that their reliability in terms of
A Study of Factors Driving Shareholders’ Value and Influencing Sensex Fluctuation In India
Executive Summary
The objective of this project is to analyze the most important factors which drive shareholders, value. Shareholders’ value here refers to the MVA (market value added) which means the additional value which shareholders are earning on their invested money. The performance of a company matters a lot in creating a positive image of that company in front of its stakeholders. Moreover, the main objective of a company is to maximize the shareholders’ value. So, shareholders always want to know that the Company with whom they have entrusted their hard earned money is efficiently utilizing it and thus, creating Value for them. We have always read the annual report of the Companies to find out information about their “top line” and “bottom line”. We also have various financial ratios and terms which act as essential factors to consider for our aid like Return on Capital Employed (ROCE), Return on Net worth (RONW), Earning per Share (EPS), Dividend per Share (DPS), Debt Equity Ratio (D/E Ratio) and Economic Value Added (EVA).
This research is an attempt to find out whether EVA, DPS, D/E Ratio, EPS, ROCE, RONW of the companies listed in sensex really explains the value accretion for the shareholders and cause fluctuation in sensex. So, I have taken these variables as Independent variables and MVA as a dependent Variable (shareholders’ value) to apply regression analysis to come out with a result that which variable is having a high degree of Correlation with MVA and significantly explains variation in MVA.
To perform this analysis secondary data has been collected from Prowess and www.bseindia.com
Out of 30 companies listed in sensex, 23 companies are selected as sample. 7 companies are eliminated because of inadequate information available for these companies. The reason behind choosing these companies is that their reliability in terms of
Bibliography: o CMIE’S Prowess o http://www.bseindia.com/about/abindices/bse30.asp o http://www.bseindia.com/about/abindices/betavalues.asp o http://www.bseindia.com/histdata/hindices.asp o http://neeravnagar.blogspot.com/2007/08/drivers-of-shareholders-value.html o Ali M Ghanbari (Jul’07) “The Relationship between Economic Value Added and Market Value Added: An Empirical Analysis in Indian Automobile Industry” The ICFAI Journals of Accounting Research. o Chapter 32 of “Investment Valuation” by Aswath Damodaran ----------------------- 65