Measuring economic value added and its comparison with other methods of evaluation of financial performance of management in state and private banks: A case study in Bank Saderat, Parsian Bank

Abstract

A lot of efforts have been done to investigate ways of evaluation of financial performance of management. The purpose of this study is to determine the variable with high explanatory power of banks' market value. Then 4 variables included economic Value Added, Net Operating Profits after Taxes, EPS and P/E choice were selected as factors determining firm market value and review the market value of each separately between governmental and nongovernmental banks. In order to fulfill the objectives of the study Saderat bank have been selected as representative of the governmental banks and Parsian bank have been selected as representative of the nongovernmental bank and during the five-year period 2009-2011 were studied. Vuong Z- test is used to determine the best variable determining market value. The results indicate that the economic value added have greater explanatory power in comparison with the other three variables Net Operating Profits after Taxes, EPS and P/E in nongovernmental banks market value. Results indicate that Economic Value Added Compared with Net Operating Profits after Taxes can be more explained market value in governmental bank but Economic Value Added Compared with the other two variables EPS and P/E has less Explanatory power than the market value of the governmental banks.