Relationship of Economic Value Added and Shareholder's Wealth

Many Indian banks are discovering the key to their long-term growth does not lie in products and services alone but in assets that can never be replicated, that is, their unique relationship with customers, employees, suppliers and distributors, investors and the communities they serve. Indian banking has seen many changes in the last decade like imposition of prudential standards, greater competition among banks. There was paradigm shift in trends in banking over a last decade. Various papers were reviewed before conduct of the study. The objective of this study was to determine shareholders value (in terms of economic value added) of selected Public sector banks during the last five years, that is, since 2004-05 to 2009-2010 & to examine EVA in bank and its impacts on share price. Cost of Equity was calculated by applying CAPM Model. The Study was done by applying various analytical tools such as Descriptive statistics, ANOVAs, Correlation. From the study it was found that in year 2010, State Bank of India has maximum net operating profit after tax & maximum invested capital among all selected banks. The study has concluded that among all the selected banks, State Bank of India has maximum Net operating Profit after Tax of Rs. 38877.93 Crore on an average during 2005-2010. Among all selected Banks SBI has maximum Economic value added. Allahabad bank, IDBI, Bank of Maharashtra, Canara Bank, Dena Bank, Indian Overseas Bank, United bank of India, UCO banks has positive relationship between their EVA & share price