The Impact of Economic Value Added, Market Value Added and Traditional Accounting Measures on Shareholders¡¯ Value: Evidence from Jordanian Commercial Banks

Hanan Ali Al-Awawdeh and Sa¡¯ad Abdul Kareem Al-Sakini

International Journal of Economics and Finance, 2018, vol. 10, issue 10, 40

Abstract: The purpose of this is study is to test the impact of economic value added, market value added and traditional accounting measures on the shareholders’ value in the Jordanian commercial banks, based on a sample of 13 banks during the period 2010-2016. The study used the shareholders’ value as a dependent variable, while five independent variables were used, including Economic Value Added (EVA), Market value added (MVA), and three traditional accounting measures, namely; the rate of return on assets (ROA), rate of return on equity (ROE), and the Earning per share (EPS). The study found, by using the common regression analysis, that the rate of return on assets (ROA) and the economic value added (EVA) had a positive and statistically significant effect on maximizing the shareholders’ value, while the rest of the traditional accounting standards or the market added value had no any significant impact on shareholder’ value. The study concluded that traditional accounting standards are still constitute an important input for assessing shares, and maximizing the shareholders’ value along with modern performance assessment measures, especially economic value added. The study recommended that the performance assessment of banks should be based on two criteria- the rate of return on assets and the economic value added.

Date: 2018
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