Economic Value Added _Formated_.pdf

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Jahur & Riyadh:Economic Value Added as a Management Tool 53 H a : There is a significant correlation between the various performance measures such as EVA with ROA, Interest Income, Spread, Net Profit, Profit Per Employee or Deposit Per Employee. 8. Scope of the Study The study has covered 04(four) Nationalized Commercial Banks, 18 (eighteen) Private Commercial Banks, 12 (twelve) Foreign Commercial Banks and 05 (five) Specialized Banks in order to make the study more representative. The study has covered a period of 2001. 9. Methodology of the Study The Study is both theoretical and empirical one. In order to prepare theoretical framework of the Study, existing available textbooks, research articles, journals, and magazines had been consulted. The study is primarily based on secondary data. Secondary data used in the study include Chairman’s Report, Income Statement, and Balance Sheet of the selected 39 Banks covering the period 2001. The Secondary data have been tabulated and analyzed manually. EVA of all Selected Banks has been computed on the basis of method III (net of interest and tax). This is because the concept of leverage as applicable to banking company is different from that of any other type of company. Banks are managed on the basis of their assets & liabilities, and work on the principle of trying to earn more on their deployments than what they pay for their funds. Method I and II would apply in situation where leverage is priced or alternative level of leverage is applicable. Hence, Method III had been followed in this paper. The ranking of the 39 banks selected as sample has been done on the basis of the following separate parameters: 1. Return on Assets; 2. Deposits Per Employee; 3. Net Profit 4. Net Profit Per Employee 5. Interest Income 6. Spread; and 7. EVA
54 Bank Parikrama Ranking of all above measures are given separately. In order to test the hypotheses of the study, rank correlation between EVA and other measures of performance have been used. The formula is as follows: r k 6 ∑ d = 1 − 2 n 2 ( n − 1) Where, r k = Rank correlation co-efficient d = the difference between the two ranks n = number of observations Then, appropriate test has been used/employed to know whether correlation coefficients between measures are significant or not. Findings and Their Analysis While a lot of study has been made into the use and relevance of EVA for the Corporate Sector across the world, very little attention has been given hitherto to its applicability to the banking sector. The present study on EVA as performance measure of 39 banks operating in Bangladesh is of first kind. It must also be noted that the banking sector has not so far addressed itself to the need for analyzing its performance from the angle of shareholders value addition. One reason for this could be the fact that EVA itself is a relatively new measure. With the liberalized banking and financial environment, more banks seem to have approached the public for subscription of shares in their companies and over a period of time, they ought to be in a position to reward the shareholders adequately, failing which, their standing will be adversely affected. The study of EVA for the banking sector has been compared with other parameters used for judging the performance of banks. 11. Measurement of Performance of the Selected Banking Companies The present study has measured performance of 39 banks operating in Bangladesh through measures of EVA and other parameters such as Net Profit, ROA, Interest Income, Deposit Per Employee, and Profit Per Employee. The computation of Cost of Capital, performance measures of banks, and ranking of the select banks on the basis of EVA and others measures have been exhibited in the Appendix 1-4 respectively. Table 1 shows the banks that have fallen into ranks ranges from one to ten on the basis of EVA and others measures.
Page 1 and 2: Bank Posikrama Volume XXVII,No.1, M
Page 3 and 4: 48 Bank Parikrama superiority of a
Page 5 and 6: 50 Bank Parikrama Where, ROI = Retu
Page 7: 52 Bank Parikrama bank earned throu
Page 11 and 12: 56 Bank Parikrama performance measu
Page 13 and 14: 58 Bank Parikrama REFERENCES Anthon
Page 15 and 16: 60 Bank Parikrama Appendix 2 Banks
Page 17 and 18: 62 Bank Parikrama Appendix 3 (Contd

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