ECONOMIC VALUE ADDITION IMPLICATIONS: A STUDY OF THE PAKISTANI BANKING INDUSTRY

Aamir Azeem, Ali Fayyaz, Atif Khan Jadoon


DOI: http://dx.doi.org/10.22555/pbr.v19i4.1871

Abstract


Human beings are mostly concerned about value addition
in almost every aspect of life. Does this reality prove accurate in
secondary markets investment? This empirical study deals with the
Economic Value Addition of major seventeen banks of Pakistan
including national and public limited banks. In this research, ROE,
ROCE, and OCF are taken as parameters of profitability while
marketability parameters are PE and MB ratio. Two sample t-tests
show that a new banks value creation is more in comparison with
old banks in the context of EVA. Private and Government bank are
not significantly different in EVA. Fixed effect modeling and Cluster
estimation infer that Profitability parameters positively impact EVA.
Marketability parameter MB positively impacts EVA while PE ratio
is statistically insignificant. Correlation analysis shows that
investors of the banking sector in Pakistan do not pay special
attention to EVA in their investment decisions.


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