Comparison of EVA (Economic Value-Added) and Accounting Profit in Explaining Share Returns of Deposit Banks

Abstract

In this study, the success of EVA (Economic Value-Added, a modern performance assessment method) and net profit (a conventional performance assessment method) in explaining the financial performance of corporates was compared. For this purpose, the stock market performance of the shares of deposit banks operating in the banking sector in Turkey was used as the performance indicator of corporates. Then, EVA and the net profit of the period were used to explain the stock market performance of the deposit banks. The research sample was composed of eight deposit banks that have been operating since the year 2005 and whose shares have been publicly traded in stock markets since then and which have available financial tables and share data for this period. The data obtained for this research sample were then subjected to panel data analysis. It was concluded, based on present findings, that EVA was more successful than the net profit of the period in explaining the stock market performance of the deposit banks.

A model proposal for estimating banks’ future value: Evidence from Turkey

“…Using a panel regression model,Boztosun (2017) studied the relationship between the value-based EVA and accounting-based ROE measures by applying the current year and one-year lagged values of the stock returns of banks using data of 8 deposit banks on BIST between the years 2005 and 2016. He concluded that the current and one-year lagged stock returns of banks are explained more strongly by the value-based EVA measure than the accounting-based ROE measure and that EVA can be used in the Turkish banking sector(Boztosun, 2017, p. 575).…”