IMPACT OF ECONOMIC VALUE ADDED ON STOCK PERFORMANCE OF COMMERVIAL BANKS: A PAKISTAN PERSPECTIVE

Abstract

Purpose: The purpose of this study is to examine the impact of economic value added on the share prices of commercial banks listed on K.SE-100 index in Pakistan. Methodology/Sample- The study involved use of a sample of 10 banks taken out of 14 banks listed at KSE-100. Data was collected on annual basis for the period 2010-2014. Findings- The analysis ofthis research substantiate the impact of EVA on share prices in commercial banking sector. The share prices are seen to be acting independently of the EVA of the banks in the sample for the five year time period in the study. Practical Implications- The research aims to add to the limited literature available on the relationship between EVA and stock performance in Pakistan. The outcome of the research might be useful for corporate banks and banking regulatory bodies to understand the significance of EVA in explaining the stock returns ofbanks. The banks might find EVA as a better predictor ofmanagerial performance. EVA can also be helpful in assessing the workforce productivity by directly linking their decision making to shareholders worth.