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    • Though the issue is so

    2018-11-06

    Though the issue is so vibrating, but strikingly, little academic studies (Gill, 2003; Dhankar and Kumar, 2007; Sehgal and Pandey, 2010; Tiwari and Singla, 2015) have explored the comparative accuracy of these models in India. To my knowledge this PD 0332991 is among the few studies that provide large scale evidence on the accuracy of valuation models in India. The contribution of this paper is to add empirical evidence to this research area. Rest of the study is organised as follows. In Section 2, we discuss the data and sample used in the study. Methodology is provided in Section 3. Section 4, deals with empirical results and finally, we conclude the study in Section 5.
    Data, sample selection and research hypotheses
    Methodology
    Empirical results
    Conclusions Comparison to prior research on fundamental value estimates revealed that results of this study are consistent with Bernard (1995), Penman and Sougiannis (1998), Francis et al. (2000), Subrahmanyan and Venkatachalam (2004)Imam et al. (2013), , on superiority of residual income model over FCFE in case of income oriented method, whereas in case of market oriented method the superiority of PE_M and PB_M over PS_M is consistent with the findings of Liu et al. (2007), Deng et al. (2009), Demirakos et al. (2010), and Nissim (2011). As far as composite value estimates are concerned the results support Yee (2004) and Vardavaki and Mylonakis (2007) argument that every bona-fide estimate provides information. Therefore, composite value estimate provides an intrinsic value with more informative variables in the model.
    Introduction Measurement of market value addition (MVA) has received increasing attention in recent years (Athanassakos, 2007). Accordingly, a number of empirical studies have been focused on determining as to which metric is best for measuring value creation. It is been argued that traditional accrual based earning measures like operating income (OI) operating profit (OP), profit after tax (PAT), return on investment (ROI) etc. are often incompetent, manipulative and misleading in explaining value creation (Armitage, Wong & Douglas, 1995; Kaur & Naratng, 2009; Palliam, 2006). In 1990s Stern Stewart & Company came out with a new metric “Economic Value Added (EVA)” that, according to them, drives stock prices, creates wealth and can explain the changes in shareholder value in a better possible way than other traditional performance measures (Stewart, 1994). They claim EVA as the performance measure that comes closer to measuring the true economic profitability of a company and is directly linked to the shareholders׳ value. In an empirical evidence by Stewart (1994) ganglia was amplified that EVA is about 50% better than traditional earning based measures in explaining changes in shareholders׳ value on a contemporaneous basis. It is against this backdrop, scholars have devoted considerable time and effort on investigation of the claim, whether EVA is a better measure to explain MVA than traditional earning based measures. However, the empirical literature debating as to which measure among EVA and earnings is superior in explaining the MVA creation offers conflicting findings (Anderson, Bey & Weaver, 2004; Athanassakos, 2007; Awan, Siddique & Sarwar, 2014; Hasani & Fathi, 2012; Kaur & Narang, 2009; Largani & Fathi, 2012; Palliam, 2006; Shen, Zou & Chen, 2015). These conflicting findings have resulted in the creation of two distinct camps; one camp belongs to those researchers who argue that EVA dominates traditional earning based measures in explaining MVA (See e.g., Ahmed, 2015; Awan et al., 2014; Bhatnagar, Bhatnagar & Bhatia, 2004; Feltham, Issac, Mbagwu & Vaidyanathan, 2004; Medeiros, 2005; Parvaei & Farhadi, 2013; Sparling & Turvey, 2003;Tortella & Brusco, 2003). Contrary to this, the other camp belongs to those researchers who found traditional earning based measures to dominate EVA in explaining MVA (See e.g., Kaur & Narang, 2009; Mangala & Joura, 2002; Pandya, 2014; Peixoto, 2002;Ramadan, 2016; Ramana, 2007; Sharma & Kumar, 2010; Sharma & Kumar, 2012;Venkateshwarlu & Kumar, 2004).