Economic value added and corporate firm value implications

Abstract

Purpose - Recent studies focus on the corporate firm value and relation with financial parameters. This study reveals the interaction between economic value added on corporate firm value and specific financial parameters such as P/E, WACC, ROE and ROIC. This analysis focuses primarily on how corporate value is effected by the other variables and the duration that this influence leads. Methodology – The quarterly data is derived for public banks in Turkish markets for the period 2006Q1-2018Q3. In the light of the data obtained, PE, ROE, ROIC, WACC and WACCEVA values calculated for seven public banks. Each financial indicator was analyzed in terms of trend and it was decided that the existing deterministic components should be eliminated in order not to affect the analysis result. Findings- The summarized results indicate different occasions for each stock such as economic value added has significant effect on firm value for couple of the firms and WACC and EVA variables have one period lagged effect for all stocks. Conclusion- We indicate that firm value is effected from financial measures and further analysis should focus on investor buy/sell behaviors in time lags.