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Determinants of Value Creation: An Empirical Examination from UAE Market

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  • B. RAJESH KUMAR

    (Institute of Management Technology, Dubai Academic City, UAE)

Abstract

The study based on a sample of 61 UAE listed companies examines the determinants of value creation. Size in terms of total assets of a firm is inversely related to value creation. Value as measured by market to book value of equity is negatively related to the size measured by total assets. Larger the size in terms market capitalization, higher would be the value created. Higher earnings relative to price signify higher value creation. Firms having higher risk are expected to have higher returns. The study finds statistical support for the fact that increasing leverage increases the risk of equity shareholders. Hence leverage increases leads to increased expected returns to account for increased risk for equity shareholders. The study also suggests that the average market returns is inversely related to earnings to price ratio. Lower average stock returns are predicted for firms with low market value of equity relative to their earnings. Riskier firms tend to have lower earnings relative to their market value of equity.

Suggested Citation

  • B. Rajesh Kumar, 2015. "Determinants of Value Creation: An Empirical Examination from UAE Market," International Journal of Economics and Financial Issues, Econjournals, vol. 5(1), pages 75-85.
  • Handle: RePEc:eco:journ1:2015-01-06
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    References listed on IDEAS

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    Cited by:

    1. Samreen Fahim Babar & Yasir Zeeshan, 2018. "Financial Institutions and Chinese Investment: The Review of China Pakistan Economic Corridor (CPEC) Policy," European Journal of Economics and Business Studies Articles, European Center for Science Education and Research, vol. 4, EJES May-.

    More about this item

    Keywords

    Value Creation; Market Value; Book Value; ROI; Capital Expenditures;

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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