Purpose: The study aims to examine the relationship between traditional and value-based performance measures and Market Value Added (MVA) of firms listed under selected Indian stock indices. It also evaluates how Economic Value Added (EVA), DuPont analysis, and Tobin's Q influence shareholder value creation. Backgound: The Indian capital market has witnessed substantial growth over the past two decades, characterized by increased participation of institutional investors, expansion of listed companies, and diversification across large-cap, mid-cap, and small-cap segments. This dynamic environment necessitates a deeper examination of how performance measures influence firm value across different market indices. While several studies have analyzed value-based measures individually, limited research has explored their combined impact on Market Value Added across multiple indices in India. Against this backdrop, the present study attempts to analyze the relationship between selected performance measures-Economic Value Added, DuPont analysis, and Tobin's Q-and Market Value Added of firms listed in CNX Nifty, Mid Capitalization, and Small Capitalization indices. By doing so, the study aims to provide insights into the effectiveness of value-based performance metrics in explaining shareholder wealth creation in the Indian capital market. Research Design: The study uses panel data analysis for the period 2013-14 to 2023-24 covering 250 nonfinancial companies from CNX Nifty, Mid-Capitalization, and Small Capitalization indices. Performance measures such as EVA, DuPont, and Tobin's Q are analyzed using descriptive statistics, correlation matrix, and panel data regression models including pooled OLS, Fixed Effects Model (FEM), and Random Effects Model (REM). Diagnostic tests such as F-test, Breusch-Pagan Lagrangian Multiplier test, and Hausman test were applied to determine the most appropriate model. Analytical Findings: The results indicate that Economic Value Added and DuPont analysis have a significant positive relationship with Market Value Added, suggesting that value-based performance measures contribute to shareholder wealth creation. Tobin's Q shows a mixed relationship across indices and is not statistically significant in the fixed effects model for overall firms. The findings highlight that EVA is the strongest predictor of Market Value Added among the selected measures. Originality: The study contributes to the literature by examining the combined influence of EVA, DuPont, and Tobin's Q on Market Value Added across multiple Indian indices using panel data analysis and introducing Excess Total Shareholder Return perspective. The study provides useful insights for investors, corporate managers, and market regulators by emphasizing the importance of value-based performance measures in evaluating firm performance and enhancing shareholder wealth. Conclusion: Overall, the study concludes that investors and corporate managers should focus more on value-based performance metrics while making investment and strategic decisions. The results emphasize that enhancing economic profitability and operational efficiency plays a crucial role in improving market value and sustaining long-term shareholder wealth. These findings offer important implications for stakeholders, policymakers, and financial analysts in strengthening performance evaluation practices in the Indian capital market.
Dr.P. Uma (Thu,) studied this question.
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