An Analysis of Determinants of Shareholders Value of Nifty Companies in India – 2009-10 to 2017-18

Abstract

In this research, one of the prominent Shareholder Value Metric, Market Value Added (MVA) is used to measure shareholder value. The primary Objective of this research is to objectively and empirically identify the profit variants which maximize shareholders’ value on a long term. This paper focuses on bridging this gap in the present research in finance. A sample of 50 listed companies comprising the NIFTY Index in India has been chosen. Multiple Regression Analysis was primarily conducted in order to observe the causal influence of profit variants, viz., the average figures of Earnings Before Interest, Taxes, Depreciation and Amortization, (EBITDA), Earnings After Taxes(EAT), Free Cash Flows(FCFs), Cash From Operations(CFOs) and Dividend Pay-out Ratio(D/P Ratio) on Shareholders’ Value. The data pertaining to the above has been collected for a period of nine years (FY 2009-10 to FY 2017-18). Multiple Regression Results reveal that the prominent profit indicators which contribute significantly towards the determination of MVA are EAT, D/P Ratio and CFOs. This indicates that MVA of the companies comprising the NIFTY INDEX is fairly determined by the net profits (after taxes) or EAT, D/P Ratio and by CFOs.