EVA BASED PERFORMANCE MEASUREMENT: A CASE STUDY OF SBI AND ICICI BANK

Maximizing the shareholders wealth is the primary objective of financial management. The returns which they receive on their investments made by the shareholders measures the shareholders wealth. Returns what the shareholders receive are of two types, first is in the form of dividends and the second in the form of capital appreciation reflected in the market value of the shares of which market value is the dominant part. There are number of factors which influences the market value of the shares of which, may not be fully influenced by the management of the firm. Expectations of the shareholders regarding the return on investment is one factor which has a significant influence on the market value. Some measures like return on equity, earnings per share, operating profit margin, return on capital employed and net profit margin exist to evaluate the performance of the business. The shareholders require at least a minimum rate of return on their investment depending on the risk in the investment. The problem of these measures is that they lack in comparison. So the concept Economic value added (EVA) was developed to overcome these problems. The report studies the profile of the Indian banks to explain the relationships of the shareholder investments and corporate performances. Here in this report a study was made on the two banks I.e SBI a public sector bank and ICICI a private sector bank and analysis has been made using the tool Economic value added (EVA). Keywords •