The Use of Shareholder Value Measure in Practice

By

ACKNOWLEDGEMENT

I would like to take this opportunity to thank my dissertation supervisor who has always shown confidence in me. He has offered his patience, remarks, propositions and understanding. Here I would also like to mention my parents who have always believed in me for all my hard work. My family, including my parents, brother and sister has endlessly supported me during my life and academics. This has helped me in making positive decisions for my life. I would also mention my peers and co-workers and appreciate their collaboration and expert advice on every circumstance. I am also grateful towards my University and my Department, the administrators, faculty members and fellow students for their support throughout this study.

DECLARATION

I declare that the material stated in this dissertation/thesis is original and does not present work of any other scholar or research study conducted in the past. Material in this study is not partially or completely published elsewhere and collected only for the purpose of this study. I also acknowledge that I have complete understanding of the requirements, guidelines, regulations and procedures of the University with respect to the endowment of higher education degree and my research work. Here, I would also like to take the opportunity to declare that I have exclusively followed the requirements, guidelines, regulations and procedures of the University regarding this research study.

ABSTRACT

Shareholders' interests are represented by a board of directors that is responsible for overseeing the firm's management. Shareholders have three options to express their dissatisfaction with a firm: sell their shares, continue to hold their shares and attempt to influence the firm, or passively continue to hold their shares in the hope that things will improve over time. The objectives of this research are the carry out the differences in measuring the shareholders values in practice between two companies from two different industries. This analysis helps in understanding the company's sensitivity about their shareholders and how much they concentrate on shareholders' value by creating the policies and designing the plans. The aim of this report is to study the use of shareholder value measures in practice by comparing and contrasting the shareholder strategies of two companies operating in different industrial sectors and countries.

TABLE OF CONTENTS

ACKNOWLEDGEMENTII

DECLARATIONIII

ABSTRACTIV

CHAPTER 1: INTRODUCTION1

1.1Background of the study1

1.2Research aims and objectives5

1.2.1Aims5

1.2.2Objectives5

1.3Research Questions6

1.4Definition of terms7

1.5Dissertation layout7

CHAPTER 2: LITERATURE REVIEW8

2.1Introduction8

2.2Maximizing shareholders value11

2.3Shareholder Value metrics13

2.4Defining Value Creation16

2.5Methods used for measuring shareholder values:17

2.5.1Strategic profit model (SPM)18

2.5.2Economic value-added (EVA)19

2.5.3Shareholder value analysis20

2.6Examining long-term shareholder value creation21

2.7Controlling Shareholders Regime24

CHAPTER 3: METHODOLOGY26

3.1Introduction26

3.2Research Methodology26

3.3Data collection methods28

3.3.1Interview28

3.3.2Likert scale Survey30

3.4Questionnaire Design31

3.5Data Analysis32

3.6Secondary sources32

3.7Sample33

3.8Participants33

3.9Limitations of the study33

3.10Ethical considerations34

3.11Summary35

CHAPTER 4: ANALYSIS AND DISCUSSION36

4.1Analysis36

4.1.1Survey analysis from the share holders36

4.1.2Interview analysis from the investment managers42

4.2Discussion46

4.2.1Shareholder strategies and measures46

4.2.2Cash Flow Components and shareholder value50

4.2.3Increasing share holders value51

4.2.4Investing in R&D53

4.2.5Assets and Shareholder Value54

4.2.6Capabilities and Shareholder Value55

CHAPTER 5: CONCLUSION, RECOMMENDATIONS AND LIMITATIONS58

5.1Conclusion58

5.2Recommendations61

5.3Limitations61

REFERENCES62

APPENDIX65

Appendix A: Letter of Permission65

Appendix B: Consent form66

Appendix C: Likert Scale Questionnaire Survey67

Appendix D: Interview Questionnaire68

CHAPTER 1: INTRODUCTION

Background of the study

Shareholders' interests are represented by a board of directors that is responsible for overseeing the firm's ...