An Analytical Study on Shareholder Economic Value Creation in the Banking Industry of India

Abstract

A series of dramatic changes has been observed across the financial sector, primarily due to the imperative impact of globalisation. Globalization has brought in a paradigm shift in the management of banks and measurement of their performance. It is now a well-established fact that the aim of every business entity should be to maximize shareholders wealth, thus shareholder value creation has become an important criterion of evaluating financial performance of the banks companies now a day. Therefore the shareholder value creation a facts the profitability of banks. the aim of this research is to provide banks with accurate information of impact of determinants of shareholder value creation on profitability as well as shareholders wealth the main purpose this research investigate to if there is relation between determinants of value creation and shareholder wealth. In accordance with the objectives of this study, 11 hypotheses were formulated and were based on the proposed conceptual framework of shareholder value creation. newline The research collects data from the 25 commercial banks in India from 2005-2015. A series of statistical test are performed in order to test if the relationship exist. The results of hypotheses testing showed that out of 11 determinants. Industry concentration, market share and credit risk had a significant impact on shareholder value creation in banking industry of India. Whereas other determinants staff cost, bank efficiency, financial structure, deposits and advances do not have positive effect on shareholder. newline The findings of this study revealed that shareholder value creation had a significant impact on the profitability of banks. Whereas it was observed that the impact of industry concentration on profitability of banks was least significant as compared to the impact of market share on shareholder value created. newline newline newline