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

Author

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  • Pritpal Singh Bhullar
  • Deepak Tandon

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.

Suggested Citation

  • Pritpal Singh Bhullar & Deepak Tandon, 2019. "Impact of operating efficiency on firm value - a case of Indian banking sector and information technology sector," International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 23(3), pages 452-463.
    • Handle: RePEc:ids:ijbglo:v:23:y:2019:i:3:p:452-463
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