“Impact of Economic Value Added on Financial Performance”: Special Reference to Selected Private Banks in Sri Lanka.

Abstract

Economic Value Added [EVA] is a performance measures developed by Stern Steward & that attempt to measure the true economic profit produced by a company. A metric is useful for investors who wish to determine how well a company has produced value for its investors. The main objective of this study is to find out the impact of Economic Value Added on Financial Performance in selected private banks in Sri Lanka. To attain this objective, distinctive methodologies which are consistent with the previous research studies have been used. Convenience sampling technique is used to draw the sample from the private banks. Such as Hatton National bank, Commercial bank, Sampath bank, Nations Trust bank, Development Finance Corporation of Ceylon and Seylan bank. Secondary data are collected for the study which consisted annual reports of said banks during the period of 2006-2012 (7 years). Operational hypotheses are formulated which have been tested using correlation and regression analysis. The results revealed that there is a relationship between EVA and financial performance. Mainly, there is a significant relationship between EVA and ROE.  In addition Economic Value Added [EVA] has impact on financial performance. This study is beneficial to the academicians, policymakers, practitioners and researchers to formulate the suitable policy in Sri Lanka as well as other similar countries.

Key words: Economic Value Added, Financial Performance, Private Banks.