Title: Investors' concern for value addition in their economic decisions: empirical investigation of the banking sector of Pakistan

Authors: Shahid Ali; Junrui Zhang; Aamir Azeem

Addresses: School of Management, Xi'an Jiaotong University, Xi'an, Shaanxi, China ' School of Management, Xi'an Jiaotong University, Xi'an, Shaanxi, China ' Department of Management Science, Virtual University of Pakistan, Pakistan

Abstract: Shareholders are mostly concerned about value addition in every aspect of their investment. The empirical investigation evaluates value-addition-measures and accounting-measures; its supremacy in the banking sector' investment by setting up the procedure of Heeren and D'Agostino (1987). This study uses data from 17 commercial banks of Pakistan, and the findings reveal that accounting measures have a positive and significant relation, whereas value-added measures do not exhibit a strong relationship with share prices. Value addition proxies are not better while explaining variation in share prices in superiority settings. Shareholders focus on accounting measures that are less immune to window dressing instead of value addition measures. It reflects the irrational behaviour of investors in their economic decisions in PSX. Bank age is statistically significant, while bank holding has no significant relationship with share prices. The study proposes that investors should pay due attention to value addition concept in their economic decisions and invest in old banks, and the government should force banks to show value-added measures in their public disclosures.

Keywords: value addition measures; accounting measures; share prices; banks holding; bank age; economic decisions.

DOI: 10.1504/IJBPM.2019.102025

International Journal of Business Performance Management, 2019 Vol.20 No.3, pp.261 - 277

Accepted: 12 Jun 2019
Published online: 03 Sep 2019 *

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