The Impact of Leverages and Operating Efficiency on Market Value Added: Empirical Evidence from India

Abstract

This article examines the relationship between the market value added and degree financial leverage, degree of operating leverage, and asset turnover ratio of the listed firms in India. The period of study was from 2013 to 2019, and data were collected in annual frequency. Our study concludes that the degree of financial leverage and asset turnover ratio are significantly and negatively associated with the market value added of listed firms in India. We also reported an insignificant relationship between market value added and degree of operating leverage. Our results indicate that promoters holding and firm size are important factors driving the performance of the firms listed in India.

THE IMPACT OF FINANCIAL RATIOS ON THE VALUE OF COMPANIES THAT CONDUCTED M&A WHICH REGISTERED IN IDX ON 2016-2021

“…On the other hand, there are some drawbacks of these restrictions and have influenced with more efficient and significant measurements (Sura, Panchal, & Lather, 2023). EVA is considered as a better criterion than traditional measurements such as ROA, ROE, and ROI to measure value creation and internal performance of companies (Kumar, Bhatia, & Chattopadhyay, 2022). increase in share value, but in fact there is no evidence that financial markets recognize and include EVA in their share prices (Shubita, 2013).…”

“…From a literature review and based on previous research, the influence between EVA and financial ratios to MVA varies. Several studies have found a positive effect between EVA and MVA (Faiteh & Aasri, 2023) (Kumar, Bhatia, & Chattopadhyay, 2022) (Supriani & Pernamasari, 2021) (Nakhaei & Hamid, 2013) which means it is expected that when the company conducts M&A and there is a positive value on EVA, this provides information that the company's value is increases too, but some find it has no influence (Rahmawati & Yunita, 2018). Lacking influence of EVA with market value will make investors cannot use the same internal value creation measures as traditional performance measures (Alipour & Pejman, 2015).…”

“…EVA determines the criteria for business performance, the effectiveness of its financial structure, as well as a single reference level for various company activities both in financial and investment activities (Jakub, Viera, & Eva, 2015). The effective management also has an important role in increasing the value of the company because it helps to make stronger decisions, which leads to increased company performance (Kumar, Bhatia, & Chattopadhyay, 2022).…”

“…Sales growth, operating profitability, level of capital and cost of capital can be considered as drivers of core values. The operational efficiency, financial efficiency and competency investment can be reflected in MVA (Kumar, Bhatia, & Chattopadhyay, 2022). The greater MVA value will make shareholders and investors happier because the wealth can increase (Sunarko & Martini, 2018).…”

Peran Firm Size Sebagai Moderasi Dalam Faktor-Faktor Yang Mempengaruhi Firm Value

“…Hasil pengujian selanjutnya menunjukkan bahwa asset management memilki pengaruh negatif dan signifikan terhadap firm value dengan koefisien sebesar 11.61 dan nilai signifikansi sebesar 0.0222 < 0.05. Hasil ini bertentangan dengan penelitian dariKumar et al (2021); Miswanto & Oematan (2020);Akinleye & Olufemi (2019). Berdasarkan observasi dari sampel perusahaan penelitian, besar kemungkinan terjadinya hubungan yang negatif antara perputaran asset dengan firm value dikarenakan perputaran asset yang sudah sedemikian produktif dan optimal dalam menghasilkan penjualan mengalami kendala dalam menghasilkan kas dalam periode yang cepat.…”