Shareholder Value and the Articulation of P/B and Stock Return in Egypt’s Case50 Index

This study examines the contribution of fundamental financial information to shareholders value in Egypt stock exchange. The sample consists of the thirty one non financial firms included in the stock market index CASE50. The results indicate that certain financial fundamentals are quite informative, thus contribute to shareholder value significantly. Regarding the classification of financial fundamentals, the results indicate that shareholder value is significantly associated with firms' liquidity, assets efficiency, expense control and leverage. The merits of this paper are three fold. First, this paper is the first study in the Egyptian index that addresses how to support shareholder value, which is one of the fundamental targets of the investment in financial markets. Second, the paper presents a proof that the P/B ratio (being a proxy for shareholder value) takes into account the stock returns as well. This renders the P/B ratio very good proxy for the measurement of shareholder value. Third, the estimation procedure addresses the true relationship between the variables through examining the exponential relationship between the dependent and independent variables. The results indicate that the exponential relationship improves the results significantly. Certain policy implications are drawn to support the credibility and informativeness of the shareholder value in the CASE50 index