Measuring shareholder value in Tunisian banking

This paper examines the relative and incremental information content of economic value added (EVA) and traditional performance measures, focusing on the Tunisian banking industry. Our sample comprises only publicly listed commercial banks, and comprises ten banks over a period of ten years (after liberalisation periods from 1997 to 2006). Regression analysis indicates the EVA measure that accounts for the specifics of banking (EVA<SUB align="right"><SMALL>BKG</SMALL></SUB>) is of very little explanatory power. In contrast, intermediation and interest margins are more useful than other earnings measures in explaining the market value of commercial banks. Also, the standard economic value added (EVA<SUB align="right"><SMALL>STD</SMALL></SUB>) seems to explain better shareholder value creation than a wide range of simple accounting and other performance indicators. Incremental information content tests show that EVASTD components contribute marginally to information already available to the market participants (i.e. the intermediation margin). These results have implications to banking-related academicians and practitioners.