Title: Impact of operating efficiency on firm value - a case of Indian banking sector and information technology sector

Authors: Pritpal Singh Bhullar; Deepak Tandon

Addresses: University Business School, Maharaja Ranjit Singh Punjab Technical University, Bathinda, India ' PGDM Banking and Financial Services, International Management Institute, B-10, Qutab Institutional Area, New Delhi – 110016, India

Abstract: Indian banking sector and IT sector have undergone metamorphic changes amidst reforms. The efficiency, effectiveness and productivity in the banking and IT sector depict the transformation vis-a-vis the reforms. The present study examines the effect of operating efficiency on valuation of firm in context of Indian banking sector and IT sector. The authors have done a pilot study comprising of 15 banks and 15 IT companies over a time span of 2005 to 2015. Panel data analysis has been employed to examine the main objective of research. The independent variable, operating efficiency, is proxied by six financial ratios (FATO, ROCE, EV, NPM, QOI and EV/sales) and enterprise value acts as dependent variable. The study concludes that the fixed asset turnover (FATO) ratio and return on capital employed (ROCE) gives negative relation with enterprise value (EV) in banking sector whereas in IT sector similar trend is indicated by fixed asset turnover ratio.

Keywords: operating efficiency; panel data; enterprise value; banking; IT sector.

DOI: 10.1504/IJBG.2019.102924

International Journal of Business and Globalisation, 2019 Vol.23 No.3, pp.452 - 463

Received: 01 Feb 2018
Accepted: 22 Sep 2018

Published online: 11 Oct 2019 *

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