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Measuring shareholder value in asset-based lending industries

Franco Fiordelisi and Stefano Monferrà

Managerial Finance, 2009, vol. 35, issue 10, 885-903

Abstract: Purpose - The purpose of this paper is to analyse the creation of shareholder value (SHV) created by non-depository financial institutions and, especially, by leasing and factoring (L&F) companies. Design/methodology/approach - The cost of capital of both L&F companies is estimated using an accounting procedure and, next, the economic value added (EVA) created by Italian L&F companies over the period 2002-2004 is estimated. Findings - L&F companies display high profitability and EVA levels over the period analysed: a very large part of leasing and factoring companies achieved a positive EVA and the lowest median level of EVA created is at least 11 per cent of capital invested in the company, while at least 50 per cent of leasing companies achieved a positive EVA and the lowest median level of EVA created is almost 2 per cent of capital invested in the company. Research limitations/implications - Future research may try to investigate other markets. The paper's focus on Italy for data collection for L&F is problematic and data are collected from a unique data base. Practical implications - SHV creation is the main strategic objective of L&F companies so the paper is of interest to both academics and practitioners. Originality/value - This is the first study focusing on SHV creation by non-depository financial institutions and, especially, L&F companies.

Keywords: Cost of capital; Economic value added; Assets; Italy; Leasing; Factoring (search for similar items in EconPapers)
Date: 2009
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