Abstract:
Shareholders are considered as one of the major key players of an organization.
Present arena, stakeholders of the organizations attempt to find a timely and reliable
metric to predict shareholders’ wealth. The study aims to identify the relationship
between traditional and modern financial metrics with shareholders’ wealth. ROA
and ROE were considered traditional financial performance metrics, while EVA was
considered modern. Data of 24 firms based on the highest market capitalization, over
five years from 2013-2017, were extracted from their annual reports. Descriptive
Statistics, correlation analysis, multicollinearity, and the pooled ordinary least square
methods were used to analyze data. The correlation analysis results denoted a positive
relationship between ROA, ROE, and EVA with MVA. Hypotheses were tested
based on the pooled regression results. The findings of the study revealed that ROA
and EVA have a significant positive relationship with MVA, while the EVA is
making the highest relationship towards MVA. Thus, it is recommended that the
financial managers focus more on EVA in predicting shareholders’ wealth.
