Prediction of Shareholders’ Wealth : A Quantitative Analysis

Shareholders' wealth has become an important concept among investors in the globalized economy. Investors who have a variety of options will be interested in evaluating the performance of corporate sector in terms of shareholders' wealth before making any investments. Shareholders' wealth is measured in terms of Economic Value-Added (EVA). The present study attempts to analyze the relationship between shareholders' wealth, i.e., EVA and different financial performance variables, on the one hand, and construct a multiple regression model for determining shareholders' wealth, on the other. Dividend, IC and NW not only have a highly positive correlation coefficient with EVA, but the correlation coefficients are also significant, as is evident from the probable error-based test of significance. In order to examine whether the developed multiple regression model is reliable or not, Z-test for two sample means is administered. The result clearly indicates that the visible difference in the two mean values is only due to sampling fluctuations and not due to any major reason. Hence, the model developed in the paper can be used to predict EVA