Economic Value Added and Corporate Performance Measurement ...

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comISSN 2156-7506VOLUME 3NUMBER 8August, 2012International journal ofContemporary Business StudiesIn this Issue: Recovery Process in Financial Crisis Companies: the Italian ExperienceElisa Giacosa, Alberto Mazzoleni.................................................................................................. 6 Economic Value Added and Corporate Performance Measurement: ThePortrait of a Developing CountryDr. Madan Bhasin………………………………………………………………………………………… 19 A Study of Customer’s Perception regarding E-Banking ServicesAnupam Sharma…………………………………………………………………………………………. 38 The Need for the Integration of Emotional Intelligence in ManagerialEducationReshu Agarwal, Pradeep Sharma……………………………………………………………………..54An International Journal Published byAcademy of Knowledge Processw w w . a k p i n s i g h t . w e b s . c o mCopyright © 2012 IJCBS1Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comw w w . a k p i n s i g h t . w e b s . c o mInternational journal of Contemporary Business StudiesA journal of Academy of Knowledge ProcessSaddal H.AEditor-in-ChiefEditorial BoardE n r i c h K n o w l e d g e t h r o u g h Q u a l i t y R e s e a r c hCopyright © 2012. Academy of Knowledge Process3

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comw w w . a k p i n s i g h t . w e b s . c o mDR.V.MAHALAKSHMI M.L,MBA,Ph.D7A, CID Quarters, V.K.Iyer Road,MandaveliE n r i c h K n o w l e d g e t h r o u g h Q u a l i t y R e s e a r c hCopyright © 2012. Academy of Knowledge Process4

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comhave analyzed companies' industrial plans, but haven't formalized the necessary adjustments for acompany in crisis.2. LITERATURE REVIEWThe current body of literature on the subject of crisis has focused on aspects of prevention,management and resolution of company crisis situations. The definition of "crisis" has changed overtime: a crisis is no longer considered an occasional and extraordinary moment in the lifecycle of acompany (Bradley, 1978; Cazdyn, 2007; Alas-Gao, 2010), but a normal event caused by adeterioration of a firm's “vitality” (Tichy-Ulrich, 1984; Mitroff-Pearson, 1993; Roux-Dufort, 2007;Rosenthal-Pijnenburg, 1991), the causes of which are also related to the environment (Meyers, 1986).Since the crisis is not an extraordinary event, the company has to learn how to manage the risk ofcrisis, against which the company should put in place a suitable risk management (Culasso, 2009).A company has to therefore approach the different types of crisis systematically (Pauchant andMitroff, 1992; Pearson and Clair, 1998; Gundel, 2005) with the use of standardized tools andmethodologies (Slatter-Lovett, 2004; Guatri, 1995), even if the recovery process is considered a“traumatic” event in the company lifecycle (Arendt, 1977; Norberg, 2011).The literature presents several studies considering the most suitable intervention for recovery(Deeson, 1972; Ross-Kami, 1973; Schendel-Patton, 1976; Taylor, 1982; Argenti, 1983; Smith et al.,2005; Chisholm-Burns, 2010; Badzmierowski, 2011), also referring to the "turnaround process"(Slatter, 1984; Bibeault, 1999; Sloma, 2000; Schrager, 2003; Lenahan, 2006) whose aim is to adaptthe business model (Brusa, 2011) to the corporate crisis.The form and structure of the recovery projectis not analyzed in Italian management literature or the Italian normative source. The literaturepresents a model relating to the industrial plan, but doesn't formalize the necessary adjustments to theindustrial plan for a company in crisis.3. RESEARCH QUESTIONS DEVELOPMENTThe purpose of the study is to formalize a recovery plan model and the economic-financialcommunication with stakeholders during the recovery process. In order to meet the study's aims withthe companies in the sample, the study centered around the following core research questions:- RQ1: what is the form and composition of a recovery project model?- RQ2: what is the process for economic-financial communication with the stakeholders in orderto increase the company's credibility?- RQ3: does the recovery project have to be adapted in accordance with the Italian regulation ofcrisis resolution and management?On the basis of these research questions, the following hypotheses have been developed:- H1: the recovery project must include both a descriptive part concerning the causes of thecrisis, the recovery strategy and the corresponding operational actions, both the effects ofrecovery on the economic and financial situation of the company;- H2: the company has to employ an economic-financial communication process to thestakeholders in order to increase the company's credibility. These process is made during threemoments in the recovery process: the initial notification of the recovery project; the annualfinancial statements and the monitoring of the implementation phase of the recovery project.- H3: the recovery project must be adapted in accordance with the Italian regulatory schemeadopted by the company to overcome the crisis.4. DATA AND METHODOLOGYThe study sample is composed of 98 Italian private companies which have developed a recoveryprocess between 2009 and 2010. Even if information about the number of Italian companies involvedin a recovery process in the same period does not exist, it is possible to consider the empirical data asCopyright © 2012. Academy of Knowledge Process7

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comsufficiently representative in terms of numerousness, project complexity and amount of restructureddebt.Data has been sourced from the Unicredit Group, which is the first bank in Italy to have created adivision within the company dedicated to the restructuring of its credit positions. The Unicredit Groupacted as creditor in the study sample of recovery projects. The sample is predominantly composed ofunlisted companies on the Italian Stock Exchange (86%). Companies operate in different sectors,among them, the most representative are the financial holding sector (11.6%) and the industrialproducts and services sector (11.2%). The others representative sectors are the following: real estate(9.2%); household goods (8.2%), telecommunications (7.1%), constructions (7.1%), fashion (5%),distribution (5%) and others minor sectors. The amount of debt restructuring is more than halfbetween 100 and 500 million euro (54.1%), while a quarter of the companies haverestructured a debt of an amount less than 100 million euro (25.5%). About 14% ofcompanies have restructured a bank debt from 500 to 1,500 million euro. The sample iscomposed of both small-to-medium sized firms as well as large ones: this distinction is oflittle relevance, because the amount of debt restructured by each company has a greaterpertinence.The current state of the recovery projects in the study sample is as follows. A large part of the"company reorganizations" will be or are already being re-evaluated, as they were based onprovisional values that have not been confirmed. Only 27 recovery projects are regularlyimplemented; 7 have been forced into operation as a result of unexpected events (in general, theinjection of third-party capital), 6 projects resulted in bankruptcy proceedings, while 58 are currentlyin a phase of re-development as they have not respected the objectives laid out by the project itself(see Table I).State ofthe projectTable I – The current state of the recovery projects in the sampleForcedimplementationVoluntaryIndue toIn redevelopmentimplementationbankruptcyunexpectedproceedingseventsNo. 7 27 58 6 98Source: personal elaborationSeveral levels of analyses were used in the methodology. Starting with the study of literature, thesample was analyzed with the aim of identifying the relevant aspects and their successfulcharacteristics in order to establish a theoretical recovery project model. The data necessary to theresearch questions from RQ1 to RQ2 were drawn from the content of the 98 recovery projects,available from Unicredit Bank. There were no interviews with the companies of the sample.The provisory results from the content of the 98 recovery projects were tested through surveys: wemade four interviews to the heads of the restructuring departments of four involved financial advisors(Mediobanca, Lazard, Banca Leonardo and Rothschild), which followed about 41% of the companiesin the sample (these four interviews covers about forty cases). The remaining involved financialadvisors were not available to respond to the interview within the time necessary to conclude theresearch. These interviews had a semi-structured format, aimed at acquiring some standardisedinformation:- the content of the recovery project;- the process for economic-financial communication with the stakeholders in order to increasethe company's credibility.The provisory results along with the results of the interviews allowed us to formulate definitive resultsabout RQ1 and RQ2. The empirical analysis was limited to the study of the recovery projects; theimplications of the recovery operations on the financial statement were not examined in depth, froman empirical point of view. Another aspect not covered by the study was the reports through which theTotalCopyright © 2012. Academy of Knowledge Process8

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comeconomic-financial situation was communicated after the approval of the plan. This was due to therelevant documentation being unavailable.The approach used is inspired by the grounded theory (Glaser and Strauss, 1967; Corbetta, 2005):observation and theorisation proceed side by side, creating a sort of “circular process”. Indeed, thetheorisation is formalised in successive steps, thanks to the analysis of the information acquired in thesample; at the same time, the theorisation influences the methods of data collection used in thesample.The information necessary to the research questions RQ3 were drawn from the analyses of Italianregulatory scheme adopted by the company to overcome the crisis.5. FINDINGSThe main results produced by the research are discussed in more depth below and can be summarizedunder the following categories:- the recovery project model;- the economic-financial communication in the company crisis;- the “legalization” of the recovery project.5.1 The recovery project modelTo answer RQ1—what is the form and composition of a recovery project model?—it is useful to referto the data from the companies in the sample, with the purpose of identifying the common, successfulcharacteristics of their projects in order to build the model recovery project in theory.First, a recovery project should set out a detailed examination of the causes of the company crisis,including the warning signs observed during the incubation period (Turner, 1976), and the methodsfor resolving it. It must furthermore outline the prospective economic and financial forecast over a setperiod of time. When considering this time period, it’s useful to refer to the timeframe of theindustrial plan, usually of a duration between three and five years (Brunetti, 1967) however, in severecases, the company may take between 10 and 15 years to recover (Mazzola, 2003). Interestingly, inthe Anglo-American approach, the time period deemed reasonable for a company to return toeconomic and financial good health is at the most three to five years, except in the case of financialplans covered by long-term contracts with reference to costs and revenues (American Institute ofCertified Public Accountants, 2009).From the operational point of view, the recovery project is generally composed of three parts: anexecutive summary, the recovery plan and the economic-financial plan (Mazzola, 2003).The recoveryproject’s model can be reduced to two key components (as the executive summary is a précis of thetwo other plans):- The recovery plan: this contains the analysis of the causes of the crisis and the economic andfinancial situation at the point of crisis. It highlights the recovery strategy and thecorresponding operational actions, in addition to pointing out the contribution stakeholderswill make in the recovery (Shuchman and White, 1995; Whitney, 1999; Pajardi, 2008);- The economic-financial plan: this develops the forecasts related to the balance sheets and theincome statements, taking in what was laid out in the recovery plan.This two-part framework is validated by the analysis of the sample (see Table II). Most of therecovery projects analyzed are laid out in two parts: the first part presents the causes of the crisis, therecovery strategies and above all the requests made to the stakeholders (recovery plan); the secondpart develops the economic and financial flows in accordance with the principles of the first document(economic-financial plan). Specifically, 85 of the 98 cases analyzed follow this two-part format, whilethe remaining 13 do not.Copyright © 2012. Academy of Knowledge Process9

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comTable II – The composition of the recovery projectDistinctionNo suchTotalbetween recoveryplan and economicfinancialplandistinctionNo. 85 13 98Source: personal elaboration5.1.1 The recovery planAccording to the proposed model, the content of the recovery plan should contain the followingelements:1. Presentation of the company: in addition to the standard company information, thepresentation of the company should outline relevant information such as the company's historyand its prominent past achievements, its position in the competitive field and its degree ofcommitment to its main stakeholders.2. Causes of the crisis: the analysis and understanding of the crisis is one of the most importantaspects of a recovery project. The plan has to explain the full context in which the crisis started(Rosenthal, 2003); indeed, the possibility of intervening in an effective manner depends entirelyon the ability to identify the originating factors of the crisis in a clear and timely manner.Sometimes the crisis uncovers some critical factors which have remained hidden until such anevent brings them to the fore (Morin, 1976).3. Initial economic and financial situation: the financial situation should be presented clearly andbe supported by reliable, accurate statistics and records; furthermore, the evaluation criteriamust be a going concern, while emphasizing the use of administrative prudence in theestimations of figures in the financial statement (especially if the recovery process involves thepossibility of the disposal of business assets). Likewise with regards to the financial situation,some information must be provided which shows the extent and the gravity of the crisis, suchas the presence of any warranty on the active assets and, among the passive assets, the positionsmost at risk, such as those regarding suppliers, banks and employees who have begun legalactions of recovery.The three elements outlined above were found in the vast majority of the cases analyzed fromthe sample (see Table III).Table III – Presence in the sample recovery plans of the three main elementsPresence of the Absence of the Totalthree elements three elementsNo. 90 8 98Source: personal elaboration4. Recovery strategy: the plan should highlight the strategic and operational decisions and actionsthat can bring about corporate recovery. The interventions should be clearly identified anddescribe what should be effectuated in the emergency phase (with the principal aim ofguaranteeing financial equilibrium), the stabilization phase (principally aimed at guaranteeingthe return to profitability) and the development phase (restoring and retaining business asusual). In general, greater emphasis is given to the first two phases, which form the foundationof the conditions necessary to bring about the company's revival. All of the projects analyzed inthe sample contained a recovery strategy: in a number of relevant cases, the strategy was torenegotiate the firm's debt positions, confirming the strategic orientation and ascribing the crisisto external, exceptional economic factors, deemed unforeseeable but temporary (see Table IV).Copyright © 2012. Academy of Knowledge Process10

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comCompanyreaction tostrategyTable IV – Company reactions to recovery strategyApproval of old Change of Totalstrategy and crisis strategyconsidered anexceptional eventNo. 66 32 98Source: personal elaboration5. Negotiation with the stakeholders: the recovery plan should include the results of negotiationswith the stakeholders. Enacting the recovery strategy often presupposes the ability of thecompany and its consultants to lay out the project in a reliable, reasonable and comprehensiblemanner to facilitate its acceptance by the firm's stakeholders. In almost all of the analyzedcases, the negotiation and the agreements with the stakeholders were adapted for eachstakeholder as necessary (see Table V) and involved, for the most part, extensions of the naturaldeadlines of the debts and, in not a few of the cases, a partial settlement of the debt.Table V – Presence of adapted agreements with the different classes of stakeholdersPresence ofdifferentiated agreementsAbsence ofdifferentiated agreementsTotalNo. 72 26 98Source: personal elaboration6. Guarantees offered by the recovery plan: the recovery plan's effectiveness is usually largelydependent upon the occurrence of potential future events, which every plan should take intoaccount (in the drafting stage). These events should be reasonably achievable but are, at thatstage, nevertheless uncertain. For this reason, the recovery plan should pay particular attentionto the forms of guarantee (in a broad sense) that it is able to offer the company's stakeholders.In the sample, there was a diffusion of guarantees supporting the plan, in general offered in adifferentiated manner to different categories of stakeholders (Table VI).Table VI – Presence of asset guarantees differentiated among the different categories of companystakeholdersPresence of guarantees Absence ofguaranteesTotalNo. 48 50 98Source: personal elaboration7. Execution of the recovery plan: the stakeholders require and often obtain some assurancesguaranteeing the success of the project and protecting their investments. These assurances arein general related to: the possibility of being involved in the recruitment of managers who will play a central role inthe leadership of the company; the forecast of asset and profit agreements, the achievement of which is a demonstration ofthe proper execution of the recovery project and the attainment of the objectives which ithad set out.Thirty companies in the study sample have taken on new managers. In 25 of these 30 cases, thenew managers were indicated as "welcomed" by the banking system (see Table VII).Table VII – Presence of new managersStakeholdersinvolved in theselection of newmanagersStakeholders notinvolved in theselection of newmanagersNo. 25 (*) 5 30(*) These managers were "welcomed" by the banking systemSource: personal elaborationTotalCopyright © 2012. Academy of Knowledge Process11

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.com5.1.2 The economic-financial planAccording to the recognized method of plan development (AIFI, 2002; Borsa italiana, 2003;Ferrandina and Carriero, 2010; Mazzola, 2003; American Institute of Certified Public Accountants,2009) the economic-financial plan uses the recovery plan as its foundation and gives particularreference to the assumptions on which the economic results and the financial flows are based.The methodology used when formulating an economic-financial plan should follow the guidelinesset out by the literature, specializing in constructing “prospective financial statements” with particularreference to the “financial projections” (American Institute of Certified Public Accountants, 2009).The economic-financial plan should comprise the following elements:1. Basic hypothesis of the development of the plan: one can identify both specific hypothesesrelated to the firm's recovery, which have already been described in the recovery plan, as wellas general hypotheses (such as average payment and collection times, warehouse rotation, andduration of the technical cycle) which instead must be outlined in this part of the document.2. Economic-financial measures and synthesis of the plan: the economic-financial plan, afterhaving acknowledged the hypotheses of recovery defined and negotiated with the recoveryproject, must develop these elements into economic-financial measures through the use ofbalance sheets, income statements and cash flow records. The objective of this exercise is todemonstrate the firm's capacity to generate economic results and cash flows in accordance withthe commitments previously made..3. Analysis of the sensitivity of the economic-financial plan: the prospective results highlightedby this part of the plan incorporate aspects of unpredictability. It is often necessary to employsimulations capable of showing the "safety margin" of the recovery project, that is, theprobability that it will obtain the objectives set out. The majority of the recovery projectsinvolved this analysis of sensitivity. Specifically, of the 77 cases in the sample that includedthis type of analysis, 40 carry it out through a stress test on the principal drivers upon which theproject is based, whereas 37 use "multiple scenarios" upon which the project is based (seeTable VIII).Table VIII – Sensitivity analysis used in the economic-financial planPresence of Absence of Totalsensitivity analysis sensitivity analysisNo. 77 (*) 21 98(*) Of these, 40 through stress tests and 37 through “multiple scenarios”Source: personal elaboration5.1.3 Some peculiarities of the recovery project from the study sampleIn the sample, there are a considerable number of companies that emphasize the financial dimensionof their recovery projects, the simple renegotiation of the deadline or additional conditions to theirindebtedness (for the most part to banks). In same cases, the economic dimension of the recoveryprojects have also been examined, with reference to the means of intervention in terms of costs,revenues and economic results. Only 12 companies in the sample put exclusive emphasis on theeconomic-profit dimension, 46 concentrated on the financial aspects, while 40 dealt with both aspects(see Table IX).Table IX – Emphasis on the financial or economic dimension of the recovery planEconomic Financial Both Totaldimension dimensionNumber 12 46 40 98Source: personal elaborationIn the majority of cases, this led to the real value of the recovery project being overlooked; that is, thecapacity to support a profound change in the variables of the company's success (product strategy,organization, management control, etc.). This attitude is confirmed by the fact that 66 cases indicateno change of the company strategy in their recovery plans. The question is considered in 32 of the 98cases analyzed (see Table X).Copyright © 2012. Academy of Knowledge Process12

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comTable X – The redefinition of the company strategy in the recovery projectChange in Absence of Totalthe companystrategychange in thecompanystrategyNo. 32 66 98Source: personal elaborationChanges within the board of directors and/or changes in company governance were observed in thesample projects. In 68 cases, there was a total absence of changes in company governance; in caseswith changes of company governance (30 cases), it was often an action imposed by the stakeholders,especially from those in the banking sector (Table XI).Table XI – The revision of company governancePresence Absence of Totalof changes changesNo. 30 68 98Source: personal elaboration5.2 The economic-financial communication in the company crisisA company crisis is generally characterized by a process of reduction of the company's credibilitywith regards to its stakeholders, which often turns into distrust, making it difficult to continue toacquire the resources necessary to function normally, internally or externally (Whitney, 1999). It istherefore imperative that lines of communication with all concerned are open, transparent andcomprehensive when managing a company crisis (Heath, 1998).The presence of informational asymmetries (Mazzoleni, 2004; Sabovic-Miletic and Sabovic, 2010)between the company and its stakeholders is a well-known phenomenon. Attempts have been made toremedy this through large investments in economic-financial communication via the promotion of an"accountability" culture, with an emphasis on the tendency to disclose company information.Disclosure can be effected through the correct use of the existing avenues as well as through use ofthe Internet as a tool for dissemination (Salvioni and Teodori, 2003; Giacosa and Guelfi, 2003;Quagli and Teodori, 2005; González-Herrero and Smith, 2008). In addition, stakeholders may begiven access to records addressed to third parties and information contained in documents that aretypically for internal matters only, such as financial statements, reports for specific types ofcompanies, etc. This level of disclosure is often the only way for the stakeholders to obtain a completeoverview of the state of the company and form a judgment on the effectiveness of that company. As aresult, it is expected that the stakeholders will be in a better position to facilitate the process ofacquiring the fundamental resources needed for the company's development. To this end, models havebeen developed capable of reducing the information anomalies for external parties and to create theconditions for nurturing relationships of trust (Eccles et al., 2001).An efficient and effective economic-financial communication could increase the company's credibility(Coda, 1991; Corvi, 1997; Netten and van Someren, 2011), facilitating the acquisition of resources inorder for "business as usual" to resume. The question of the effectiveness of the economic-financialcommunication takes on a still more important role in the case of a firm in crisis, since the latter ischaracterized, in general, by a high dependence on third parties. The degeneration of the relationshipof trust during the periods of crisis often has the consequence of disrupting the company's businesscontinuity and more or less instigating the process of voluntary liquidation (Heath, 1998).With regard to RQ2— what is the process for economic-financial communication with thestakeholders in order to increase the company's credibility?—there are three key moments in therecovery process during which the company has to employ the most careful approach to economicfinancialcommunication to the stakeholders in order to increase the company's credibility: the initial notification of the recovery project; the annual financial statements (Ferrero et al., 2003) during the recovery process; the monitoring of the implementation phase of the recovery project.Copyright © 2012. Academy of Knowledge Process13

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.com5.2.1 The initial notification of the recovery projectThe recovery project assumes the role of a tool for economic-financial communication aimed atovercoming any discrepancies between the information circulated within the company and betweenthe company and its stakeholders. Once the project's key points have been drafted, lines ofcommunication with external parties should open. Specifically, notification should begin with theparties outlined below and be made through the following avenues:1) Initial discussion with the stakeholders: once the actions described above have been set inmotion and a preliminary version of the project has been produced, the company must meetwith the company's external stakeholders and try to negotiate the conditions necessary for theproject's success. The way in which the project is presented should be tailored to the specificneeds and expectations of each intended audience:a) The banks: one of the first parties to whom the presentation is made are the banks,which, in general, represent the stakeholder with the greatest credit value with regard to thecompany. The number of banks involved in every position varies from a few units to, ingeneral, a maximum of 10 institutions; even when the number of banks involved is higherthan 10, it is reduced to a more manageable size through such mechanisms as the creation ofa steering committee.b) The suppliers of goods or services: once the project has been presented to the banksand has been met with approval (even if accompanied by requests for integration and/orchanges to some of its parts), the second stakeholder to be approached are the suppliers ofgoods and services. They generally represent a large number of parties each with individual,often small amounts of credit. The purpose of this presentation is to agree paymentextensions, ensuring continuity in the supply of resources as a way of guaranteeing businesscontinuity (Shuchman-J.S. White, 1995).c) The employees: the employees or, often, their delegates, represent the third group ofstakeholders to whom the reorganization project must be presented. The purpose of thispresentation is to obtain the support of the employees (Whitney, 1999; Shuchman and White,1995; Sutton, 2002; Pate and Platt, 2002; Gilson, 2010). The project is often simplified forthe purposes of this presentation in order to offer only the salient points of the plan (exceptin the case of very large numbers of employees for whom trade unions might appointprofessionals to hear the presentation, express opinions and evaluate the projects on thestaffs' behalf).2) Revision of the project and definitive agreement: after negotiation with the above parties,some elements of the project may require modification. The content of the redrafted project is thenverified to ensure its continued effectiveness. The modified version is distributed among thestakeholders with particular attention to those whose consensus is critical to the effectiveness of therecovery. In some cases, the project takes on a contractual form with signatures necessary from someparties.5.2.2 The annual financial statements during the recovery processThe Organismo Italiano di Contabilità (OIC) issued the Accounting Principle 6 – "Debt restructuringand financial reporting" (“Ristrutturazione del debito e informativa di bilancio”), with the aim ofoutlining accounting requirements and the integrative information with regards to the debtrestructuring. The present document legislates the debt restructurings that occur under the followingregulatory regulations: “asseveration plan” (“piano di risanamento attestato”) (art.67, 3(d) of the Bankruptcy Law); “agreement of debt settlement” (“accordo di ristrutturazione del debito”) (art. 182-bis of theBankruptcy Law); “arrangement with creditors” (“concordato preventivo”) (art.160 et seq. of the BankruptcyLaw); other types of debt restructuring.The OIC Accounting Principle 6 requires the following principal aspects to be set out in theNotes section of the financial statement: The accounting effects of a restructuring operation – the financial statement of the year ofCopyright © 2012. Academy of Knowledge Process14

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comrestructuring is the one most concerned with accounting effects. Nonetheless, the additionalinformation in the financial statement of the other periods involved attests the validity ofbusiness continuity and also whether the conditions have been respected. The disclosure related to the debt restructuring – the annual report has to attest:- the extent of financial and/or economic difficulty, its causes and the amount of debt involved;- the particulars of the debt restructuring operation;- the subsequent effects on the net financial position, on the capital and income of the company.This information is contained in the Notes of the financial statement in an appropriate section, soas to guarantee greater transparency and clarity.5.2.3 Monitoring the implementation phase of the recovery projectOnce the recovery project has been formalized, it must be monitored in order to track its applicationand effectiveness. The recovery projects analyzed need periodic reports to be drawn up (generallyquarterly in the first year and then every six months) which, through the monitoring of key indicators,demonstrate the degree of success and adherence to the recovery project. Some 78 cases in the sampleuse regular reports, while in 20 cases, this provision was not indicated (see Table XII).Table XII – Provision of periodic reports for monitoring the recovery projectProvision of Lack ofTotalperiodic reports provision ofperiodic reportsNo. 78 20 98Source: personal elaborationSpecifically, the indicators most used by the sample cases to monitor adherence of the project arethe developed revenues, the EBITDA (earnings before interest, taxes, depreciation and amortization)and the net financial position of the company. The regular updates on the recovery project's progressare important for two fundamental reasons: the contractual agreements made between the companyand its stakeholders are often dependent upon the findings of the periodic reports; and the adherenceto the recovery objectives represent the foundations on which to rebuild the necessary level of trustbetween the company and its stakeholders.5.3 The “legalization” of the recovery project of the company in crisisWith regard to RQ3, the recovery project must be adapted in accordance with the Italian regulatoryscheme adopted by the company to overcome the crisis. The recovery project forms the basis of thechoosen regulatory scheme, which give the recovery project a legal value to aid its success. In Italy,these regulatory schemes are: "the asseveration plans" (“piani asseverati”) provided for by the art.67, 3(d) of the BankruptcyLaw; "the agreements for the settlement of debts" (“accordi di ristrutturazione dei debiti”) providedfor by the art.182 bis of the Bankruptcy Law; "the arrangement with creditors" (“concordato preventivo”) in the theory of business continuityas per art.160 et seq. of the Bankruptcy Law;The above modifications/adaptations are summarized below: Voluntary recovery project (without recourse of any regulatory scheme): this is usuallycomposed of the recovery plan and the economic-financial plan. Asseveration plans: this is usually composed of the recovery plan and the economic-financialplan. No specific adaptation of the voluntary recovery project is set out. The recovery planfocuses on the capacity to re-balance the financial situation and restructure the debt. Agreements for the settlement of debts: this is usually composed of the recovery plan and theeconomic-financial plan. The recovery plan focuses on specific information in terms of therelationship with creditors. The required adaptations are the following: the certification of theexistence of an agreement with 60 per cent of the creditors, its feasibility and capacity toregularly pay the rebellious creditors. Arrangement with creditors: this is usually composed of the recovery plan and the economicfinancialplan. The recovery plan focuses on the examination of the company's capacity for15Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comrestructuring debts. The required adaptations are the following: the plan must focus the capacityfor restructuring debts and ensure business continuity; supplementary documents have to attestthe up-to-date economic and financial situation and include a complete list of creditors andpossessors of guarantees.6. CONCLUSIONS/LIMITATIONSThe recovery project is the tool that will bring about the conditions necessary for the company toreturn to economic stability and, at best, growth. It must contain all of the relevant information fornegotiating with stakeholders whose consent is necessary for the project to go ahead.A basic model recovery project has been proposed, compiled from the results of the empirical data.This proposed model is composed of two essential parts: the recovery plan, which presents the causesof the crisis, the recovery strategies and above all the requests made to the stakeholders; and theeconomic-financial plan, which develops the economic and financial flows in accordance with theprinciples of the first document.The recovery project and the supplementary reports drafted over the course of its execution form thebasis of the firm's economic-financial communication in the initial phase of the recovery and duringits implementation. In the case of crisis, the firm is in a situation of increased dependence on externalparties: the ability to identify and communicate a recovery project that reasonably guarantees businesscontinuity is a necessary step for the company's survival (Coda, 1991).Some differences have emerged between the listed and unlisted companies with regards to theeconomic-financial communication adopted. During periods of "business as usual", listedcompanies, for cultural and/or regulatory reasons, tend to adopt models of economic-financialcommunication characterized by high levels of disclosure, with the aim of interacting withstakeholders effectively and acquiring the financial resources necessary for development. In the caseof company crises, the specific tools employed for communicating the recovery project havecharacteristics similar to those used in normal business situations.With regards to unlisted companies, in normal business situations they use the annual financialstatement as the only communication tool, which is characterized by limited effectiveness and stronginformational asymmetries between the company’s reality and what is perceived externally. The crisissituation causes an increase in the company’s dependence on the stakeholders and the need forfinancial resources, in order to prevent the interruption of the firm’s business activities in a context inwhich the stakeholders’ mistrust also grows. The company crisis thus pushes companies towards theadoption of a total disclosure model, in particular the use of communication tools other than thefinancial statement of the fiscal period, which include the recovery project.The recovery projectshould be contextualized and/or adapted to the regulatory scheme in order to be able to be usedeffectively.It is possible to identify some limitations of the research: the empirical data includes only cases from aspecific geographic area (Italy) from a brief, defined period (2009–10). In addition, it will beinteresting to compare the Italian experience with that of other countries, where the regulation of therecovery process (and the corresponding recovery project) may be different.7. REFERENCESAIFI. 2002. Guida al business plan, AIFI, Milano.Alas, R. and Gao, J. 2010. “The impact of Crisis on enterprise life-cycle”, Problems an Perspectivesin Management, Vol. 3, No. 2, pp. 9-21.American Institute of Certified Public Accountants. 2009. Prospective Financial Information,American Institute of Certified Public Accountants, New York.Arendt, H. 1977. Between Past and Future: Eight Exercises in Political Thought, Penguin Books,London.Copyright © 2012. Academy of Knowledge Process16

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comArgenti, J. 1983. “Predicting Corporate Failure, Institute of Chartered Accountants in England andWales”, Accounting Digest, n. 138, pp. 1-25.Badzmierowski, W.F. 2011. “Managing a crisis”, American School & University, Vol. 83, pp. 29-32.Bastia, P. 1996. Pianificazione e controllo dei risanamenti aziendali, Giappichelli, Torino.Bibeault, D.B. 1999. Corporate Turnaround: how managers turn losers into winners, Beard Books,Washington.Borsa Italiana. 2003. Guida al piano industriale, Borsa Italiana, Milano.Bradley, G. 1978. “Self-serving biases in the attribution process: a reexamination of the fact or fictionquestion”, Journal of personality & social Psycology, Vol. 36, pp.56-71.Brunetti, G. 1967. I piani finanziari. Prime proposizioni, Libreria Universitaria, Venezia.Brusa, L. 2011. Mappa strategica e businnes plan, Giuffrè.Cazdyn, E. 2007. “Disaster, Crisis, Revolution”, South Atlantic Quarterly, Vol. 106, No. 4, pp. 647.Chisholm-Burns, M.A. 2010. “A Crisis Is a Really Terrible Thing to Waste”, American Journal ofPharmaceutical Education 2010, Vol. 74, p. 2.Cndcec, Assonime and Università Firenze. 2010. Linee guida per il finanziamento delle imprese incrisi., Assonime, Firenze.Coda, V. 1991. Comunicazione e immagine nella strategia dell’impresa, Giappichelli, Torino.Corbetta, P. 2005. La ricerca sociale: metodologia e tecniche - III. Le tecniche qualitative, Il Mulino,Bologna.Corvi, E. 1997. Economia e gestione della comunicazione economico-finanziaria d’impresa, Egea,Milano.Culasso F. 2009. Gestione del rischio e controllo strategico, Giappichelli, Torino.Deeson, A.F. 1972. Great company disaster, W. Foulsham edition, London.Eccles R.G., Herz R.H., Keegan E.M. and Philips D.M. 2001. The Value Reporting Revolution.Moving beyond the earnings games, John Wiley & Sons, New York.Ferrandina A., Carriero F. 2010. Il business plan: guida strategico-operativa, Ipsoa, Milano.Ferrero, G., Dezzani, F., Pisoni, P., Puddu, L. 2003. Le analisi di bilancio. Indici e flussi, Giuffrè,Milano, 2003.Glaser, B. and Strauss, A. 1967. The discovery of Grounded Theory, Aldine Publishing Company,Chicago.González-Herrero, A. and Smith, S. 2008. “Crisis Communications Management on the Web: HowInternet-Based Technologies are Changing the Way Public Relations Professionals HandleBusiness Crises”, Journal of Contingencies and Crisis Management, Vol. 16, No. 3, pp. 143-153.Guatri, L. 1986. Crisi e risanamento delle imprese, Giuffré, Milano.Guatri, L. 1995. Turnaround, Egea, Milano.Giacosa, E. and Guelfi, S. 2003. Le aziende della net economy, Giappichelli, Torino, 2003.Gundel, S. 2005. “Towards a New Typology of Crises”, Journal of Contingencies and CrisisManagement, Vol. 13, No. 3, pp. 106-115.Heath, R. 1998. Crisis Management. Financial Times Professional, Pitman/Financial Times, London.Lenahan, T. 2006. Turnaround, Shutdown and Outage Management, Elsevier, Burlington.Mazzola, P. 2003. Il piano industriale, Università Bocconi editore, Milano.Mazzoleni, A. 2004. Informazione e comunicazione nel sistema di controllo di gestione, FrancoAngeli, Milano.Meyers, G.C. 1986. When it hits the fan. Managing the nine crisis of business, Hougton Mifflin,Boston.Mitroff, I.I. and Pearson, C.M. 1993. “Dalla vulnerabilità alla prevenzione: un approccio alla gestionedella crisi (trad.it.)”, Problemi di Gestione, Vol. 20, p. 101.Morin, E. 1976. “Pour une Crisiologie”, Communications, Vol. 25, pp. 149-163.Netten, N. and van Someren, M. (2011), “Improving Communication in Crisis Management byEvaluating the Relevance of Messages”, Journal of Contingencies and Crisis Management,Vol. 19, No. 2, pp. 75-85.Norberg, J. 2011. “Arendt in Crisis: Political Thought in Between Past and Future”, CollegeLiterature, Vol. 38, pp. 136-140.Pajardi P. 2008. “La ristrutturazione del debito”, in Danovi, A. and Quagli, A. (a cura di) (2008),Gestione della crisi aziendale e dei processi di risanamento, Ipsoa, Milano, pp. 251-260.Copyright © 2012. Academy of Knowledge Process17

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comPate, C. and Platt, H. 2002. The Phoenix Effect, John Wiley & Sons, New York.Pauchant, T.C. and Mitroff, I.I. 1992. Transforming the Crisisprone Organization. PreventingIndividual, Organizational and Environmental Tragedies, Jossey Bass Publishers, SanFrancisco.Pearson, C. and Clair, J. 1998. “Reframing Crisis Management”, Academy of Management Review,Vol. 23, No. 1, pp. 59–76.Quagli, A. and Teodori, C. 2005. I siti web e la comunicazione ai mercati finanziari, Franco Angeli,Milano.Rosenthal, U. and Pijnenburg, B. 1991. Crisis Management and Decision Making: SimulationOriented Scenarios, Kluwer, Dordrecht.Ross, J.E. and Kami, M.J. 1973. Corporate management in crisis; why the mighty fall, Prentice-Hall,Upple Saddle River.Roux-Dufort, C. 2007. “Is crisis management (only) a management of exceptions?”, Journal ofContingencies and Crisis Management, Vol. 15, No. 2, pp. 105-114.Sabovic, S.-Miletic, S. and Sabovic, S. 2010. “The impact of the crisis on financial reporting,accounting and auditing”, Journal of Technics Technologies Education Management, Vol. 5,No. 3, p. 614.Salvioni D.M. and Teodori C. 2003. Internet e comunicazione economico-finanziaria d'impresa,Franco Angeli, Milano, 2003.Schendel, D. and Patton, G.R. 1976. “Corporate Stagnation and Turnaround”, Journal of Economicsand Business, Vol. 28, pp. 236-241.Schrager, J.E. 2003. Turnaround Management: a Guide to Corporate Restructuring and Renewal,Institutional investor, New York.Shuchman, M.L. and White, J.S. 1995. The Art of The Turnaround, Amacon, New York.Slatter, S. 1984. Corporate recovery: successful turnaround strategies and their implementation,Penguin, London.Slatter, S. and Lovett, D. 2004. Corporate Recovery, BeardBooks, Washington.Sloma, R.S. 2000. The Turnaround manager’s handbook, BeardBooks, Washington.Smith, C., Jennings, C. and Castro, N. 2005. “Model for Assessing Adaptive EffectivenessDevelopment”, Journal of Contingencies and Crisis Management, Vol. 13, No. 3, pp. 129-137.Sutton, G. 2002. The Six Month Fix. Adventures in Rescuing Failing Companies, John Wiley & Sons,New York.Taylor, B. 1982. “Turnaround, Recovery and Growth: The Way Through Crisis”, Journal of GeneralManagement, Vol. 8, pp. 2-5.Tichy, N. and Ulrich, D.O. 1984. “The Leadership Challenge: A Call for the TransformationalLeader”, Sloan Management Review, V. 26, No. 1, p. 63.Turner, B. 1976. “The Organizational and Interorganizational Development of Disasters”,Administrative Science Quarterly, Vol. 21, pp. 378-397.Whitney, J.O. 1999. Taking Management Guide to Troubled Companies and Turnarounds, BeardBooks, Washington.Copyright © 2012. Academy of Knowledge Process18

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comEconomic Value Added and CorporatePerformance Measurement: The Portrait ofa Developing CountryDr. Madan BhasinBang College of Business,KIMEP UniversityDostyk Building, 2 Abai Avenue,Almaty 050010, Republic of KazakhstanABSTRACTIt is universally accepted that the goal of financial management is to maximizethe shareholder’s value, which is the essence of economic growth. Profitmaximization is “age-old, wealth maximization is matured, and valuemaximization is today’s wisdom.” Therefore, managing and creating shareholdervalue have become the widely accepted corporate objectives since the lastdecade. In recent times, more and more corporations in India are focusing onshareholders value creation. In fact, they have adopted value-based models formeasuring shareholder value that helps to align managerial decision-making withthe firm preferences. These include economic value added (EVA), market valueadded (MVA), and shareholder-return based on the market value of shares. Inrecent years, the EVA framework is gradually replacing the ‘traditional’measures of financial performance on account of its robustness and its immunityfrom creative accounting. The present study examines the value-creationstrategies of selected Indian corporations by analyzing whether EVA betterrepresents the market-value of corporations in comparison to conventionalperformance measures. In this regards, EVA and the conventional measures ofcorporate performance, such as, RONW, ROCE and EPS are analyzed.Moreover, ANOVA, trend analysis and regression analysis are used for analyzingthe data. The study indicates that “there is no strong evidence to support SternStewart’s claim that EVA is superior to the traditional performance measures inits association with MVA.”Keywords: Economic Value Added, Market Value Added, CorporatePerformance Measurement, Developing Country, Shareholders Wealth, andValue Based Management.1. INTRODUCTIONIn the present era of globalization, corporations of emerging economies are facing new challenges.Severe competition, rapid technological change, wide volatility in real and financial markets etc., haveincreased the burden on managers to deliver superior performance, and value for their shareholders.The ultimate role of managers is often presented as increasing shareholder value. Although managersexist to create value for their owners, corporate managers do not always act to maximize shareholdervalue, because of perceived conflicts with other goals. Shareholder value does not necessarily conflictwith good citizenship toward employees, customers, suppliers, the environment and the localcommunity. Corporations that respect those constituencies tend to outperform others, suggesting thatvalue can be delivered to shareholders only if it is first delivered to other constituencies. The growthof the Indian capital market has increased the pressure on the corporations to consistently performbetter. The corporations, which gave the lowest preference to shareholders curiosity, are nowbestowing the utmost preference to it. Moreover, shareholders activism has reached to an19Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comunprecedented level partially due to integration of financial markets and partially due to regulatoryreforms (in terms of disclosure requirements and investor protection) and this has led to increasedpressure on firms to increase shareholders value consistently. Just earning profit is not enough, abusiness should earn sufficient profit to cover its cost of capital and create surplus to grow.From the economist’s viewpoint, value is created when management generates revenue over andabove, the economic costs to generate these revenues. Costs come from four sources: employee wagesand benefits; material, supplies, and economic depreciation of physical assets; taxes; and theopportunity cost of using the capital. Under this value-based view, value is only created whenrevenues exceed all costs including a capital charge. This value accrues mostly to shareholdersbecause they are the residual owners of the firm. Shareholders expect management to generate valueover and above the costs of resources consumed, including the cost of using capital. If suppliers ofcapital do not receive a fair return to compensate them for the risk they are taking, they will withdrawtheir capital in search of better returns, since value will be lost. A corporation that is destroying valuewill always struggle to attract further capital to finance expansion since it will be hamstrung by ashare price that stands at a discount to the underlying value of its assets and by higher interest rates ondebt or bank loans demanded by creditors.Wealth creation refers to changes in the wealth of shareholders on a periodic (annual) basis.Applicable to stock exchange listed firms, changes in shareholder wealth are inferred mostly fromchanges in stock prices, dividends paid, and equity raised during the period. Since stock prices reflectinvestor expectations about future cash flows, creating wealth for shareholders requires that the firmundertake investment decisions that have a positive net present value (NPV). Although usedinterchangeably, there is a subtle difference between value creation and wealth creation. The valueperspective is based on measuring value directly from accounting-based information with someadjustments, while the wealth perspective relies mainly on stock market information. For a publiclytraded firm these two concepts are identical when (a) management provides all pertinent informationto capital markets, and (b) the markets believe and have confidence in management.Shareholder’s wealth (or value) maximization is a well-accepted objective among corporate financemanagers in recent years. The shareholders wealth is measured by the returns they receive on theirinvestment. It can either be in forms of dividends, or in the form of capital appreciation, or both.Capital appreciation depends on the changes in the market value of the stocks of which market valueis the dominant part (Raiyani and Joshi, 2011). While the principle that the fundamental objective ofthe business corporation is “to increase the value of its shareholders’ investment is widely accepted,there is substantially less agreement about how this is accomplished.” Several studies have beencarried to find out what influences the share/market price of a corporation. In this context, Damodran(2002) observes: “As the lenders (debt holders and others) can protect themselves contractually, theobjective can be narrowed down to maximizing stockholders value, or stockholders wealth. Whenfinancial markets are efficient, the objective of maximizing stockholder wealth can be narrowed evenfurther: to maximizing stock prices.” Even though ‘stock’ price maximization as an objective is the‘narrowest’ of the value maximization objectives, it is the most prevalent one. It is argued that thestock prices are the most observable of all measures that can be used to judge the performance of apublicly traded firm. Besides this, the stock price is a real measure of stockholder wealth, sincestockholders can sell their stock and receive the price now. Should we accept that the stock pricemaximization leads to firm value maximization? The market value of stocks depends upon number offactors ranging from company-specific to market-specific. Financial information is used by variousstakeholders to assess firm’s current performance and to forecast the future as well (Sharma andKumar, 2010). Can we make managers responsible for the stock price maximization? While theresponsibility of firm value maximization has to be fixed with the managers, using stock prices as ameasure of periodic measure of corporate performance poses a serious problem (Irala, 2007). Whilemany argue that the stock prices are not under the full control of the managers, there are many otherswho believe that stock price maximization leads to a ‘short-term’ focus for manager. Indeed, stockprices of a corporation are determined by a multitude of agencies (like by security traders, financialinstitutional investors, short-term investors, and financial analysts) all of whom hold the stock forshort-periods, and spend their time trying to forecast next quarter’s earnings (Sivakumaran, 2011).20Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comTo generate value for shareholders, “value-based management (VBM)” system has been developed,which seeks to integrate ‘financial’ hypotheses with ‘strategic’ and ‘economic’ philosophy of thecorporation. Taggart et al., (1994) first coined the term VBM and he suggested a framework that linksthe corporation’s strategy to its value in capital market. VBM have identified five key institutionalvalue drivers (viz., governance, strategic planning, resource allocation, performance management, andtop management compensation) that are essential for sustainable value creation. The VBM approachuses metrics at different levels that are aligned to the institutional drivers, key functions andprocesses. Young and O’Byrne (2003) describe “EVA as the center-piece of a strategyimplementation process that can be linked to all the key functions and processes listed above.” Anappropriate measure of corporate performance, on the one hand, should be highly correlated toshareholder return and, on the other hand, should be able to signal the extent of periodic wealthcreation (Vijaykumar, 2011). With increased competition and greater awareness among investors,new and innovative ways of measuring corporate performance are being developed. A search for sucha measure had been the trigger for the rapidly growing literature on VBM. Modern value-basedcorporate performance measures (such as economic value added (EVA), market value added (MVA),cash flow return on investment (CFROI), cash value added (CVA), discounted economic profits(DEP), shareholders value added (SVA) etc., have been developed recently by various consultingagencies to gauge the real performance of corporations, and also to shift the focus from accountingearnings to cash flows (Chattopadhaya and Rakshit, 2010). In short, VBM enables a business toachieve desired results and to create shareholder value.EVA as a Superior Corporate Performance MeasureThe term ‘EVA’ is the acronym for “Economic Value Added” and is a registered trade mark of SternStewart & Co. of USA. Really speaking, EVA is a financial performance measure that mostaccurately reflects corporation’s true profit (Stewart, 1991). EVA is calculated “after subtracting thecost of equity capital and debt from the operating profits.” EVA is nothing but a new version of theage-old “residual income (RI)” concept recognized by economists (Alfred Marshall) since the 1770’s.EVA is based on RI concept which states that wealth is created when revenues are sufficient to covera firm’s operating costs and cost of capital (Kumar and Sharma, 2011; Kaur and Narang, 2009).Unless it covers its cost of capital, it does not create wealth. By measuring the value added over allcosts, EVA measures, in effect, the productivity of all factors of production (Lander and Reinstein,2005).EVA is the performance measure most directly linked to the creation of shareholder wealth overtime.EVA is the single measure of corporate performance, enabling investors to identify investmentopportunities and motivate managers to make value added business decisions. Stewart (1994) arguesthat “EVA is a superior measure as compared to other performance measures on four counts: (a) it isnearer to the real cash flows of the business entity; (b) it is easy to calculate and understand; (c) it hasa higher correlation to the market value of the firm, and (d) its application to employee compensationleads to the alignment of managerial interests with those of the shareholders, thus minimizing thesupposedly dysfunctional behavior of the management. The last two merits can be considered as areflection of the first two. If EVA truly represents the real cash flows of a business entity and it is easyto calculate and understand, then it automatically follows that it should be closely related to themarket valuation and it should minimize the dysfunctional behavior of the management when used asan incentive measure. In other words, close relation to market valuation and convergence ofmanagerial interests with shareholders interests is a vindication of EVA as a superior metric. AlEhrbar of Stern Stewart & Co. observes, “When EVA becomes the singular focus of all decisions, itestablishes clear and accountable links between strategic thinking, capital investments (economicreturns), operating decisions (accounting returns), and shareholder value (shareholder returns)”(Weaver, 2001).In fact, EVA is a performance metric that captures the true economic profit of a corporation. Stewart(1991) claims, “Earnings, earnings per share, and earnings growth are misleading measures ofcorporate performance and that the best practical periodic performance measure is EVA. EVA is thefinancial performance measure that comes closer than any other measure in capturing the trueeconomic profits of an enterprise. EVA also is the performance measure most directly linked to the21Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comcreation of shareholder wealth overtime.” Using the results from in-house research by the corporation,Stewart (1994) further adds that “EVA stands out well from the crowd as the single-best measure ofwealth creation on a contemporaneous basis and is almost 50% better than its closest accountingbasedcompetitor (including EPS, ROE and ROI) in explaining changes in shareholder wealth.” Trulyspeaking, EVA is based on the concept that “a successful firm should earn at least its cost of capital.Firms that generate higher returns than the cost of financing would benefit the shareholders and resultin increased shareholders wealth.” EVA was developed to help managers to incorporate two basicprinciples of finance in their decision-making, namely, maximizing shareholders’ wealth andinvestors’ expectations that differ from cost of capital. Unlike conventional measures of profitability,EVA helps the management and other stakeholders’ to understand the capital charges. It is an‘integrated’ approach to all decisive areas of financial management system. As Keys et al., (2001)describes, “Indeed, many highly regarded corporations (including Coca-Cola, AT&T, Quaker Oats,Briggs & Stratton, CSX, and Toys R Us) have switched to EVA for investment decisions, capitalreallocation, business combinations, and performance evaluation of managers and divisions.”Some criticize EVA as being a very complex framework that relies on complicated calculations. Thecost of capital calculation is particularly difficult to calculate and prone to errors that lead to grosslymisleading results. Also, EVA is not easily understood by the majority of employees because of itscomplex framework and calculations. However, Bhattacharyya and Phani (2004) have extensivelyelaborated and finally, refuted the claim that EVA is a superior performance measure on all these fourcounts. The main strength of the EVA is that it offers an indicator of wealth creation that aligns thegoals of plant or division managers to the general corporation goals. However, it also has certainlimitations, particularly when it comes to size differences, financial orientation, short-term orientationand results orientation. In the light of these shortcomings, managers would do well to complementEVA with other financial measures to create a balanced pool of measures that cover all performanceareas relevant to the success of the organization (Brewer et al., 1999).Moreover, Bennett Stewart (1991) in his book (The Quest for Value) describes EVA as: “(1)operating profits less the cost of all capital employed to produce those earnings, (2) one and the samething as Net Present Value, (3) the only measure to tie directly to intrinsic market value, and (4) thefuel that fires up a premium in the stock market value.” The selling point of EVA is that it considerseconomic profits and economic capital in order to know the “value created and destroyed” by anorganization during a particular period. Economic profit and economic capital is calculated by makingcertain adjustments into the accounting profits. However, there exist anomalies in the academicliterature about the number of adjustments required to reach economic profit and economic capital.Anderson et al., (2004) assert that “EVA provides a valuable framework for converting wrongaccounting numbers into correct estimates of value…Accounting adjustments are much ado aboutnothing.” Stern-Stewart Co. had suggested 164 such accounting adjustments to convert GenerallyAccepted Accounting Principles (GAAP) profits to economic profits (Weaver, 2001). From the studyof literature, it can be concluded that “accounting adjustments to EVA range between 5 and 16. Thenature and number of adjustments differ from one firm to another based on facts, such as, sector,accounting policy followed by the corporation and the country GAAP. There is no universal set ofadjustments or method followed in practice for the calculation of EVA” (Chary, 2009). Anotherimportant point in calculation of EVA is “calculation of the weighted average cost of capital.” Assuggested by various researchers, cost of equity capital under EVA may be calculated using capitalassets pricing model (CAPM). Various researchers (Abdeen, 2002; Kaur and Narang, 2009; Dubey,2000 etc.) have used CAPM to calculate the cost of equity thereby establishing the empirical validityof EVA calculation.The EVA based performance measurement system is the basis on which the corporation should takeappropriate decisions related to the choice of strategy, capital allocation, merger & acquisitions,divesting business, and goal setting. While deciding resource allocation it becomes necessary toappreciate the EVA impact of such decision (Rakshit, 2006). A firm can motivate its managers todirect their effort towards maximizing the value of the firm only by, first measuring the firm valuecorrectly and secondly, by providing incentives to managers to create value. Both are interdependentand they complement each other (Shil, 2009). The paper examines the effectiveness of Economic22Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comValue Added (EVA) in improving the corporate performance of the firm as a whole and also as ameasure of performance. Finally, it can be concluded that irrespective of whether EVA is linked toshare prices or not, EVA style of managing corporations with the goal of value enhancement is here tostay.”Corporate performance measurement is one of the emerging areas of research in accounting & financeamong the researchers all over the world. Therefore, the present study examines whether EVA has gotany association with the shareholders wealth creation. The rest of the paper is structured as follows.Section 2 presents a brief review of the existing literature relevant to this study. Section 3 describesthe objectives of the study and testable hypotheses are defined in section 4. The sources of data andmethodology employed for the present study is explained in section 5. Section 6 describes theempirical findings and discussions based on which the final section 7 gives the summary of the paperalong with the conclusions.2. REVIEW OF LITERATUREDuring the last two decades, several researchers, corporate professionals, and consultant firmsengaged in the field of accounting & finance have been paying their close attention on the EVA, andadmitting the limitations of traditional measures of performance. But majority of them have drawninferences about the theoretical discussion of it and a few of them have concentrated to make the EVAconcept as a legitimate tool of corporation financial performance measurement. The present sectionbriefly thrashes out the notable research works carried out so far by the leading scholars in the field.Easton et al., (1992) observed that “EVA is an increasingly popular corporate performance measurethat is often used by corporations not only for evaluating performance, but also as a basis fordetermining incentive pay.” Like other performance measures, EVA attempts to cope with the basictension that exists between the need to come up with a performance measure that is highly co-relatedwith shareholders wealth, but at the same time somewhat less subject to the random fluctuations instock prices. This is a difficult tension to resolve and it explains the relatively low correlation of allaccounting based performance measures with stock returns at least on a year to year basis. However,Stewart (1994) observed that “EVA is a powerful new management tool that has gained growinginternational acceptance as the standard of corporation governance. It serves as the centerpiece of acompletely integrated framework of financial management and incentive compensation.” In essence,EVA is a way both to legitimize and to institutionalize the running of a business in accordance withbasic micro-economics and corporation finance principles. The experience of a long list of adoptingcorporations throughout the world strongly supports the notion that an EVA system, by providingsuch an integrated decision-making framework, can refocus energies and redirect resources to createsustainable value for corporations’ customers, employees, and shareholders and for management.O’Byrne (1996) concluded that “EVA is better than other measurements, such as Net Operating Profitafter Tax (NOPAT) and cash flows.” Moreover, Peterson and Peterson (1996) analyzed traditionaland value-added measures of performance and their relationship with stock returns. Their findingsstate that “traditional measures are not empirically less related to stock returns than return on valueadded measures.” Similarly, Luber (1996) confirmed that “a positive EVA over a period of time willalso have an increasing MVA, while negative EVA will bring down MVA as the market losesconfidence in the competence of a corporation to ensure a handsome return on the invested capital.”However, Grant (1996) found that “EVA concept might have everlastingly changed the way realprofitability is measured. EVA is a financial tool that focuses on the difference between corporation’safter tax operating profit and its total cost of capital.”Chen and Dodd (1997) reported that “EVA measure provides relatively more information than thetraditional measures of accounting profits.” They also found that EVA and Residual Income (RI)variables are highly correlated and identical in terms of association with stock returns. However,KPMG-BS study (1998) assessed top 100 corporations on EVA, Sales, PAT and MVA criteria. TheSurvey has used the BS-1000 list of corporations using a composite index comprising sales,profitability and compounded annual growth rate of those corporations covering the period 1996-97.23Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.com“Sixty corporations have been found able to create positive shareholder value whereas 38 corporationshave been found to destroy it.”Thenmozhi (1999) made a comparative study of how the traditional performance measures arecomparable to EVA. Working on a sample of 28 corporations for a period of three financial years, hefound that “only 6 out of the 28 corporations have positive EVA while the others have negative. TheEVA as a percentage of Capital Employed has been found to indicate the true return on capitalemployed.” Comparing EVA with other traditional performance measures, the study indicates that allthe corporations depict a rosy picture in terms of EPS, RONA and ROCE for all the three years. Thestudy shows that “the traditional measures do not reflect the real value of shareholders and EVA hasto be measured to have an idea about the shareholders value.” Similarly, Bao and Bao (1999) revealedthat “EVA is positively and significantly correlated with the firm value.” Moreover, Banerjee (2000)attempted to find out whether Market Value of the firm is the function of current operational value(COV) and Future Growth Value (FGV). Based on the analysis of his data, he comes to theconclusion that “in many cases there was a considerable divergence between MVA and the sum totalof COV and FGV.”Ray (2001) observed that “the missing link between EVA and improved financials is actuallyproductivity.” EVA can be a powerful tool when properly applied. It allows a firm to ascertain whereit is creating value and where it is not. More specifically, it allows a firm to identify where the returnon its capital is outstripping the cost of that capital. For those areas of the firm where the former isindeed greater than the latter EVA analysis then allows the firm to concentrate on the firm’sproductivity in order to maximize the value created of the firm. Finally, as investors buy more sharesin the firm in order to have more claims on its increased value, they automatically bid up andeventually maximize the firms share price. Moreover, Mangala and Simpy (2002) discussed therelationship between EVA and Market Value among various corporations in India. The results of theanalysis “confirm Stern & Stewart’s hypothesis and concluded that the corporation’s currentoperational value was more significant in contributing to change in market value of share in Indiancontext.”Fernandez (2003) examined the correlation between EVA and MVA of 582 American corporationsfor the period 1983-97. It was shown that for 296 firms in the sample the “changes in the NOPAT hadhigher correlation with changes in MVA than the EVA, while for 210 sample firms the correlationbetween EVA and MVA was negative.” Worthington and West (2004) provided ‘Australian’evidences regarding the pooled time-series, cross-sectional data on 110 Australian corporations overthe period 1992-1998 is employed to examine information content of EVA and concluded that “stockreturns to be more closely associated with EVA than residual income, earnings and net cash flow.” DeWet (2005) conducted a study on EVA–MVA relationship of 89 Industrial firms of ‘South Africa’ andfound that “EVA did not show the strongest correlation with MVA.”Rakshit (2006) analyzed the financial performance of ‘Dabur India Limited’ by using EVA. Heconcluded that “the EVA based performance measurement system is the basis on which thecorporation should take appropriate decisions related to the choice of strategy, capital allocation,merger & acquisitions, divesting business and goal setting.” While deciding resource allocation itbecomes necessary to appreciate the EVA impact of such decision. The management accountant isexpected to successfully transform traditional management system into value based managementsystem. Similarly, Irala (2005, 2007) examined whether EVA has got a better predictive powerrelative to the traditional accounting measures, such as, EPS, ROCE, RONW, Capital Productivityand Labour Productivity. “Using the dataset for six years across 1,000 corporations, the resultssupported the claim that EVA is the better predictor of market value compared to the other accountingmeasures.” In another study by Misra and Kanwal (2004, 2007) about Indian corporations argued thataccounting-based metrics are misleading measures of corporation financial performance as they arevulnerable to ‘accounting distortions’. Results of their study reveal that “EVA (per cent) is the mostsignificant determinant of MVA as it explains the variations in share value better than the otherconventional accounting-based measures of firms’ financial performance.”Copyright © 2012. Academy of Knowledge Process24

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comKyriazis and Anastassis (2007) in their study of ‘Greek’ firms concluded that “relative informationcontent tests reveal that net and operating income appear to be more valuable than EVA. EVAcomponents add only marginal information content as compared to accounting profit.” However,Ismail (2008) provides evidence regarding EVA and corporation performance in ‘Malaysia’. Thestudy sought to explain the ability of EVA, compared to traditional tools, in measuring performanceunder various economic conditions. The study revealed that “EVA is also able to correlate with stockreturns and is superior in explaining the variations in the stock returns as compared with traditionaltools under varying economic conditions.” Similarly, Chary and Mohanty (2009) explained theconcept of value from the perspectives of stakeholders and shareholders. Using a case-based approachthey illustrated different methods of computing shareholder value. Lee and Kim (2009), however,introduced ‘Refined’ EVA (REVA) to the hospitality industry and compared it to EVA, MVA andother traditional accounting measures. The study provides interesting and meaningful findings that“REVA and MVA can be considered good performance measures throughout the three hospitalitysectors (i.e., hotel, restaurant and casino). According to the findings, REVA and MVA significantlyexplain the market-adjusted return by presenting positive coefficients.”Kaur and Narang (2009) examined the shareholder value creation using two value-based metrics offinancial performance viz., EVA and MVA for a sample of 104 Indian corporations. The study“supported the claim that EVA influences the market value of shares.” Moreover, Vijaykumar (2010),in his study supports the hypothesis of Stern & Stewart’s that “MVA of firms was largely positivelyassociated with EVA in all selected sector of Indian Automobile industry.” Kumar and Sharma(2011) examined a sample of 873 firms-year observations from the Indian market and applied‘pooled’ ordinary least- square regression to test the relative and incremental information content ofEVA and other accounting-based measures in explaining the market value added. Recently,Vijaykumar (2011, 2012) in his study, using ‘factor-analytic’ approach, attempted to find out whetherEVA has got a better predictive power of selected automobile corporations in India. The results of hisstudy showed that “out of eight variables, three factors have been extracted and these three factors puttogether explain 69.902 per cent of the total variance. Further, sales and profit after tax are found tohave a stronger relationship with EVA.” The objective of the study, done by Patel and Patel (2012),was “to determine shareholders value (in terms of EVA) of selected private-sector banks during thelast five years, i.e., since 2004-05 to 2009-2010. For none of the bank EVA has impact on share price,except EVA by Kotak Mahindra bank did have significant impact on stock price of Kotak Mahindrabank.”From this brief review of literature, it is evident that the scholars have given much importance to EVAwhile measuring performance, or value creation of any corporation. Now, the business world ismoving towards greater transparency and superior corporate governance. Thus, shareholder valuecreation aspect is of utmost importance in the present scenario of corporation performance andmanagement. Therefore, one cannot deny the present necessity of an exclusive study in this field.Moreover, we believe that it is important to make a further contribution to the literature by conductinga new study using the Indian market and find out the empirical validity of Stern & Stewart’s EVAhypothesis.3. OBJECTIVES OF THE STUDYThe examination of literature on the efficacy of various corporate performance measures brings twoimportant issues. First and foremost is that most of the research on EVA and its superiority has beenfrom the USA and other developed markets. There is an obvious requirement to examine theusefulness of EVA along with traditional financial performance measures in an alternativeinstitutional setup. However, less evidence is available about developing market. This motivates us toanalyze the highly controversial but important Stern-Stewart’s assertion regarding the superiority ofEVA in the Indian context, and contribute to the existing literature. Second, empirical evidences aboutEVA and its superiority are mostly inconclusive and controversial. So, there is further need toexamine Stern-Stewart hypothesis and help in establishing the empirical validity of EVA.Copyright © 2012. Academy of Knowledge Process25

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comThough some leading Indian corporations have already joined the band wagon of their Americancounterparts in adapting the EVA-based corporate performance systems, many other are hesitating asthere is no strong evidence that the EVA system works in India (Sarkar, 2011). In the above context,there is an immediate need for a comprehensive and elaborate study to ascertain whether the aboveclaims hold in the Indian context. The present study aims to achieve the following objectives:(a) To examine whether the sample corporations has been able to generate value for its shareholders;(b) To analyze the effectiveness of Economic Value Added over the conventional measures ofcorporate performance;(c) To figure out the relationship between EVA, RONW, ROCE and EPS; and(d) To indicate whether the significant differences, if any, exists between the actual values of EVACEand time factor of the sampled corporations.4. HYPOTHESES DEVELOPMENTOne of the purposes of this study is to provide evidences about the superiority of EVA over thetraditional performance measures. To achieve this, relative and incremental information content ofEVA and traditional performance measures are analyzed. As Panahian and Mohammadi (2011) states,“Relative information content comparisons examine if one measure provides greater informationcontent than another. On the other hand, incremental information content comparisons assess whetherone measure provide more information content than another.” Hence, the following hypotheses areput to test:Hypothesis 1:H0 There is no significant difference between mean values of EVACE, ROCE, ROE andEPS.H1 There is a significant difference between mean values of EVACE, ROCE, ROE and EPS.Hypothesis 2:H0 There is no significant difference between actual and trend value of EVACE.H1 There is a significant difference between actual and trend value of EVACE.Hypothesis 3:H0 There is no significant impact of ROCE, ROE and EPS on EVACE.H1 There is a significant impact of ROCE, ROE and EPS on EVACE.5. SOURCES OF DATA AND RESEARCH METHODOLOGY USEDIn the present era of globalization, the corporate-sector is gradually recognizing the importance ofEVA as a result of which some Indian corporations have started calculating EVA and makingdisclosures in their Annual Reports. Some of the corporations have also started using EVA forimproving their internal governance. For the purpose of current study, we have specifically selectedfive leading and globally well-known Indian corporations, namely, Bharat Heavy Electricals(www.bhel.com) Limited, Hero MotoCorp (www.heromotocorp.com) Limited (formerly known asHero Honda Motors Corporation), Infosys Limited (www.infosys.com), L&T Limited(www.larsentoubro.com), and TCS Limited (www.tcs.com). This study is primarily based on thesecondary sources of data and covers a period of five years from 2006-07 to 2010-11. However, allthe relevant data for the purpose of this study have been extracted from the corporation’s AnnualReports and other information given on their Websites.In addition to the various ‘conventional’ performance measures, such as, Return on Capital Employed(ROCE), Return on Equity (ROE), and Earnings Per Share (EPS), a ‘value-based’ metric, “EconomicValue Added (EVA)” has also been used. Undoubtedly, EVA is increasingly becoming an importantmetrics of measuring shareholders’ wealth creation, both in the developed and developing countries(like India). Undoubtedly, EVA is gaining recognition as a fundamental measure of corporateperformance despite the fact that it has been in existence for a relatively short period of time.For the purpose of current study, both time series and regression approaches are used for analyzingthe data. Moreover, the trend values of EVACE for different years have been calculated using trend26Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comanalysis. In order to test the significance of the trend and actual EVACE, Chi-square test has also beenused. Besides, ANOVA is used for comparing means of the sample corporations. In this study, all therequired data analysis has been carried out by using the SPSS 17.0 and E-views 5.1 software.6. EMPIRICAL RESULTS AND ANALYSISBasically, the theory of EVA rests on two principal assertions: first, a corporation is not trulyprofitable unless it earns a return on invested capital that exceeds the opportunity cost of capital; andsecond, that wealth is created when a firm’s managers make positive Net Present Value (NPV)investment decisions for the shareholders (Grant, 2003).Table 1 depicts the Economic Value Added (EVA) performance of the sample corporations for therecent five years period during 2006 to 2011. The analysis of the table very clearly reveals that “theEVA in absolute figures of BHEL, L&T and TCS has increased over the study period.” However, theEVA of Infosys Limited registered a slight decline (from Rs. 3379 to 2936 crores and Rs. 2732crores) during the last two fiscals ended March 2010 and 2011. It can be inferred that, on an averagebasis of five years, the maximum (Rs. 4,662.2 crores) and minimum (Rs. 692.8 crores) EVA wereposted by the TCS Limited and L&T Limited, respectively. A careful study of the results ofCoefficient of Variation shows that Infosys (with 18.8% variations) has been able to add value for itsshareholders on a consistent basis, followed by L&T (26.5% variations) as evident from their “least”estimates. Thus, the ability to create EVA “consistently” shows the ability of the two firms, especiallyBHEL and TCS in earning economic profits in excess of their overall cost of capital.Table 1: Economic Value Added (EVA)(Rs. in Crores)YearHero BHEL Infosys L&T TCSMotoCorp2006-07 485 1657 2122 591 32832007-08 575 1810 2286 890 37242008-09 835 2008 3379 890 37372009-10 1723 2670 2936 590 57592010-11 1376 3793 2732 503 6808Mean 998.8 2387.6 2691.0 692.8 4662.2Std. Deviation 533.2 875.6 505.7 183.5 1536.7Coefficient of Variation 53.4% 36.7% 18.8% 26.5% 34%(Source: Extracted from the Annual Reports of respective Corporations.)To increase EVA, thereby increasing shareholders’ wealth, Stewart (1994) has given four ways onwhich corporate business strategies should depend. First, corporations must utilize their existingresources more efficiently to improve their operating performance, resulting in higher rates of intereston existing capitals. Second, corporations should invest additional capital in only those projects wherereturn is more than the cost of capital. Third, to withdraw (or shrink) capital from the unprofitableprojects yielding negative Net Present Value. Last, but not the least, to employ an optimal capitalstructure to drive down the cost of capital.Basically, EVA capital employed (EVACE) attempts to establish the relationship between ‘EVA’ and‘average’ capital employed by the corporation. Table 2 describes the EVA Capital Employed(EVACE) performance of the sample corporations during the five year period, from 2006-07 to 2010-11, of study. A careful analysis of the table reveals that three corporations, namely, TCS Limited,Hero MotoCorp and BHEL have amply “rewarded their investors with an EVA Capital Employed” of39.31, 29.00 and 26.55 % (on an average basis), while the ‘lowest’ value for the same was posted byL&T Limited (5.41%). In sharp contrast to this, ‘higher’ variability in EVACE is seen in the case ofL&T Limited, as evident from its “highest” (57.7%) coefficient of variation.Copyright © 2012. Academy of Knowledge Process27

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comTable 2: EVA Capital Employed (EVACE) (Figures in %)YearHero BHEL Infosys L&T TCSMotoCorp2006-07 20.10 29.89 23.2 8.48 47.742007-08 20.00 27.99 18.2 8.48 38.932008-09 23.90 25.91 19.4 5.54 30.492009-10 46.50 23.14 13.6 2.67 40.222010-11 34.50 25.84 10.6 1.86 39.16Mean 29.00 26.55 17.00 5.41 39.31Std. Deviation 11.43 2.54 4.95 3.12 6.12Coefficient of Variation 39.40% 9.6% 29.1% 57.7% 15.6%(Source: Computed by the author from the Annual Reports of respective Corporations.)In fact, return on capital employed (ROCE) seeks to relate the profits with that of the total capitalemployed by a corporation. It provides sufficient insight into how efficiently the long-term funds ofowners and lenders are being used by the corporation. As a rule of thumb, the higher the ratio, themore efficient is the use of capital employed. Table 3 shows the ROCE of the selected samplecorporations. During the five years of study period, the ROCE about all the firms showedconsiderable ups and downs. However, the “mean” ROCE during the five years period were posted at51.12% by Hero MotoCorp, followed by 44.58% by TCS Limited, and 41.39% by BHEL. At thesame time, higher variability in ROCE was especially noticed in the case of two corporations, viz.,Hero MotoCorp (27.4%) and L&T (14.9%). However, the extent of variation was found to be least inthe case of BHEL (6.6%) and TCS (6.8%), respectively.Table 3: Return on Capital Employed (ROCE) (Figures in %)YearHero BHEL Infosys L&T TCSMotoCorp2006-07 43.48 42.84 45.99 20.70 49.872007-08 41.57 41.56 41.52 21.10 42.922008-09 43.33 36.95 42.90 18.50 43.272009-10 75.07 41.37 37.30 15.90 42.462010-11 52.13 44.25 37.60 15.10 44.38Mean 51.12 41.39 41.06 18.26 44.58Std. Deviation 14.01 2.74 3.67 2.72 3.04Coefficient of Variation 27.4% 6.6% 8.9% 14.9% 6.8%(Source: Computed by the author from the Annual Reports of respective Corporations)The return on equity (ROE) ratio indicates the ability of the firm in generating profit per rupee ofequity shareholders’ funds. As a rule of thumb, higher the ROE ratio, the more efficient is themanagement and the utilization of funds. Table 4 attempts to provide a snapshot of the return earnedby the selected corporations on their equity capital employed during the period of study. A carefulanalysis of the table reveals that ROE values showed fluctuating trend during the five years period ofstudy from 2006-07 to 2010-11. The “highest” average ROE was reported by Infosys Limited(75.05%), which was followed by Hero MotoCorp (46.10%), and TCS Limited (39.84%). It reflectsthat these corporations were able to provide the equity investors with better returns per rupee of theirinvestments when compared to other firms selected for the purpose of this study. Unfortunately,BHEL and L&T were two corporations with the lowest mean ROE of 27.03% and 23.74%,respectively. It is also divulged from the analysis that BHEL showed “consistent” performance inROE as evident from its least (7.4%) coefficient of variation. Similarly, the coefficient of variationwas also found to be second lowest in the case of TCS (11.1%) and Infosys Limited (11.8%).Unfortunately, the “highest” variation (37.1%) was noticed in the case of Hero MotoCorp.Copyright © 2012. Academy of Knowledge Process28

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comTable 4: Return on Equity (ROE) (Figures in %)YearHero BHEL Infosys L&T TCSMotoCorp2006-07 34.73 27.48 88.81 26.8 46.622007-08 32.41 26.53 71.12 28.2 41.342008-09 33.72 24.25 78.84 24.7 35.132009-10 64.41 27.08 68.75 20.7 37.302010-11 65.21 29.82 67.73 18.3 38.80Mean 46.10 27.03 75.05 23.74 39.84Std. Deviation 17.11 2.0 8.84 4.15 4.41Coefficient of Variation 37.1% 7.4% 11.8% 17.5% 11.1%(Source: Computed by the author from the Annual Reports of respective Corporations.)Really speaking, the earnings per share (EPS) measure the profitability of the firm on per equity sharebasis. In general, higher the EPS, better it is and vice-versa. The summary of EPS in respect of fivecorporations during the five years is reported in Table 5. It is evident from the table, “the EPS valuesshowed a decline across the sample firms for the last fiscal ended March 2011.” The maximum andminimum values of EPS, on an average basis, were recorded by the Infosys Limited (a high of Rs.92.07 crores) and TCS Limited (a low of Rs. 39.92 crores), respectively. Moreover, it is seen that“consistency” in EPS was marked by TCS (19.14%), followed by Infosys (19.93%) and L&T(20.93%). Unfortunately, Hero MotoCorp has recorded EPS (41.41%) and BHEL (30.39%) thatshowed variability on a “higher” magnitude during the 5 years study period.Table 5: Earnings Per Share (EPS)(Figures in Rs.)YearHero BHEL Infosys L&T TCSMotoCorp2006-07 43.0 98.66 67.83 50.22 38.392007-08 48.5 58.41 78.24 75.59 46.072008-09 64.2 64.11 101.65 46.30 47.922009-10 111.8 88.06 100.37 71.49 28.622010-11 96.5 122.80 112.26 64.16 38.62Mean 72.80 86.41 92.07 61.55 39.92Std. Deviation 30.15 26.26 18.35 12.88 7.64Coefficient of Variation 41.41% 30.39% 19.93% 20.93% 19.14%(Source: Computed by the author from the Annual Reports of respective Corporations.)The empirical results of ANOVA are summarized in Table 6. It is evident from the table that thecalculated values of ‘F’ are 19.72, 16.51, 25.38 and 5.03 for EVACE, ROCE, ROE and EPS,respectively. The F-critical value is 2.89 at 5% level of significance. Since the calculated value beinghigher than the critical value at 5% significance level, the null hypothesis is rejected as against thealternative hypothesis. Thus, it can be concluded that EVACE, ROCE, ROE and EPS of samplecorporations differ significantly.Table 6: Results of ANOVA—EVACE, ROCE, ROE and EPSSource of Variation SS DF MS F P-value F-criticalvalueEVA Capital Employed (EVACE)Between Groups 3295.51 4 823.88 19.72 1.03E-06* 2.87Within Groups 835.48 20 41.77Total 4130.99 24Return On Capital Employed (ROCE)Between Groups 3088.33 4 772.08 16.51 4E-06* 2.87Within Groups 935.54 20 46.78Total 4023.87 24Return On Equity (ROE)Between Groups 8353.03 4 2088.26 25.38 1.37E-07* 2.87Within Groups 1645.74 20 82.29Total 9998.77 24Earnings Per Share (EPS)Between Groups 8692.83 4 2173.21 5.03 0.005691* 2.87Within Groups 8637.89 20 431.89Total 17330.67 24(Note: SS=Sum of Squares, DF=Degree of Freedom, MS=Mean Square, *Significant at 5% significance level)Copyright © 2012. Academy of Knowledge Process29

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comTrend values of EVA capital employed (EVACE) are computed by using least square trend equation.In order to test the statistical significance of the results, Chi square test is used. The results of trendanalysis of EVACE and Chi square are summarized in Table 7. The following are the calculatedvalues of chi square test in respect of the sample corporations: Hero MotoCorp (6.59), BHEL (0.36),Infosys (0.53), L&T (0.49) and TCS (3.14), respectively. It is apparent from the table that thecalculated values of chi square test in all the sample corporations are less than the critical value of9.49. Thereby, the null hypothesis is accepted in all cases. By and large, it is inferred that differencesbetween the original and trend values are not significant in statistical sense, and the same is attributedto sample fluctuations.Table 7: Empirical Results of Trend Analysis of EVACE and Chi Square TestParameter Hero MotoCorp BHEL Infosys L&T TCSIntercept 29.00 26.55 17.00 5.41 39.31Coefficient 5.53 -1.30 -2.98 -1.91 -1.59Chi Square6.59 0.36 0.53 0.49 3.14computed valueLevel of 5%significanceDegree of 4freedom (n-1)Chi Square 9.49critical valueResults H0 Accepted H0Accepted H0 Accepted H0Accepted H0AcceptedOne of purpose of the present study is “to derive the relationship that exists between EVACE andtraditional measures of corporate performance.” Based on the data, Table 8 describes the results ofKarl Pearson’s correlation. It is evident that in the case of Hero MotoCorp Limited, ROCE and EPSare “highly” correlated with EVACE at 5% significance level. The values of ROE and EVACE were“highly” correlated at 1% significance level in case of Hero MotoCorp Limited and TCS Limited.There is no significant relationship between EVACE and traditional performance measures in case ofBHEL. The results of Infosys Limited show that there is significant relationship between ROCE andEVACE, and ROE and EVACE at 5% and 1% significance level, respectively. Further, in the case ofL&T Limited, ROCE and ROE were correlated with a higher magnitude with EVACE (5% level).Thus, it can be broadly concluded that ROCE and ROE moves in tandem with EVACE at a higherdegree.Table 8: Karl Pearson’s Correlation Matrix (EVACE, RONW, ROCE, EPS)HeroMoto CorpEVACEROCEROEEPSBHELEVACEROCEROEEPSInfosysEVACEROCEROEEPSL&TEVACEROCEROEEPSTCSEVACEROCEROEEPSEVACE1.965**.912*.9731.215.020--.0621.968**.902*--.8291.998**.981**--.1881.737.888*--.513ROCE1.805.879*1.954*.751ROE1.943*EPS1.873 11.939*--.776 --.683 11.989**--.1651.841--.0491--.145 11--.065 1Copyright © 2012. Academy of Knowledge Process130

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.com** Correlation is significant at the 0.01 level (2-tailed).*Correlation is significant at the 0.05 level (2-tailed).As a part of this study, EVACE is assumed as “dependent” variable while ROCE, ROE and EPS aretreated as “independent” variables. The regression results of Hero MotoCorp Limited are reported inTable 9. The p-values for ROCE and EPS are lower than 0.05, which confirms “the rejection of nullhypothesis of a zero coefficient at 5% level of significance.” Moreover, the ROE also influencesEVACE significantly. In addition, to measure the success of the regression in predicting the values ofthe dependant variables within the sample, R-squared is computed. The R-squared value of 0.999shows that the regression equation is best fitted.Table 9: Regression Results of Hero MotoCorp-EVACE as Dependent VariableVariable Coefficient Sr. Error t-Statistics Prob.C --6.696 0.4663 --14.473 0.044ROCE 0.401 0.016 25.587 0.025ROE 0.037 0.018 2.018 0.293EPS 0.185 0.013 14.256 0.045R-squared 0.999 Mean dependent variable 29.000Adjusted R-squared 0.999 S.D. dependent variable 11.432S.E. of regression 0.247 Akaike info criterion -0.319Sum squared residuals 0.043 Schwarj criterion -0.632Log Likelihood 4.798 F-statistic 4055.650Durbin-Watson stat 3.147195 Prob. (F-statistic) 0.012The regression results of BHEL are presented in Table 10. EVACE is known as dependent variablewhile ROCE, ROE and EPS are treated as independent variables. The p-values for independentvariables are higher than 0.05, thus the rejection of null hypothesis of a zero coefficient at 5% level ofsignificance. Further, the R-squared value of 0.482 reveals that the 48.2% of the variance of thedependent variable is explained by the independent variables.Table 10: Regression Results of BHEL—EVACE as Dependent VariableVariable Coefficient Sr. Error t-Statistics Prob.C 23.527 40.666 0.579 0.666ROCE 2.512 2.679 0.938 0.521ROE -3.919 4.968 --0.789 0.575EPS 0.057 0.172 0.334 0.795R-squared 0.482 Mean dependent variable 26.554Adjusted R-squared --1.071 S.D. dependent variable 2.538S.E. of regression 3.652 Akaike info criterion 5.419Sum squared residuals 13.340 Schwarj criterion 5.107Log Likelihood --9.548 F-statistic 0.311Durbin-Watson stat 2.630 Prob. (F-statistic) 0.829Table 11 portrays the results of regression of Infosys Limited. EVACE is known as dependentvariable while ROCE, ROE and EPS are treated as independent variables. The p-values forindependent variables are higher than 0.05, thus the rejection of null hypothesis of a zero coefficientat 5% level of significance. Further, the R-squared value of 0.952 shows that the model is best fit.Table 11: Regression Results of Infosys—EVACE as Dependent VariableVariable Coefficient Sr. Error t-Statistics Prob.C --22.999 29.034 --0.792 0.574ROCE 1.075 1.024 1.050 0.484ROE 0.010 0.368 0.027 0.983EPS --0.053 0.096 --0.554 0.678R-squared 0.952 Mean dependent variable 17.000Adjusted R-squared 0.807 S.D. dependent variable 4.95431Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comS.E. of regression 2.178 Akaike info criterion 4.385Sum squared residuals 4.742 Schwarj criterion 4.072Log Likelihood --6.962 F-statistic 6.567Durbin-Watson stat 1.754 Prob. (F-statistic) 0.278The regression results of L&T Limited are presented in Table 12. EVACE is a dependent variablewhile ROCE, ROE and EPS are treated as independent variables. The p-values for independentvariables are higher than 0.05, thus the null hypothesis of a zero coefficient is rejected at 5%significance level. Further, the R-squared value reveals that 99.9% of the variance of the dependentvariable is explained by the independent variables.Table 12: Regression Results of L&T—EVACE as Dependent VariableVariable Coefficient Sr. Error t-Statistics Prob.C -16.035 1.142 --14.046 0.045ROCE 1.483 0.252 5.895 0.107ROE -0.226 0.164 --1.378 0.400EPS -0.004 0.008 --0.550 0.680R-squared 0.999 Mean dependent variable 5.406Adjusted R-squared 0.999 S.D. dependent variable 3.122S.E. of regression 0.199 Akaike info criterion --0.395Sum squared residuals 0.040 Schwarj criterion --0.707Log Likelihood 4.987 F-statistic 325.896Durbin-Watson stat 2.593 Prob. (F-statistic) 0.041The regression results of TCS Limited are reported in Table 13. EVACE is taken as dependentvariable while ROCE, ROE and EPS are treated as independent variables. The p-value for ROE islower than 0.05, while for other independent variables, the p-value being higher than 0.05. The resultslead to rejection of null hypothesis of a zero coefficient at 5% level of significance. ROE influencesEVACE significantly. The R-squared value of 0.997 shows that the regression equation is best fitted.Table 13: Regression Results of TCS—EVACE as Dependent VariableVariable Coefficient Sr. Error t-Statistics Prob.C 7.517 6.089 1.234 0.434ROCE -0.048 0.219 -0.218 0.864ROE 1.218 0.151 8.065 0.079EPS -0.366 0.047 -7.734 0.082R-squared 0.997 Mean dependent variable 39.308Adjusted R-squared 0.986 S.D. dependent variable 6.121S.E. of regression 0.721 Akaike info criterion 2.175Sum squared residuals 0.520 Schwarj criterion 1.862Log Likelihood -1.436 F-statistic 95.718Durbin-Watson stat 1.513 Prob. (F-statistic) 0.075One major cause that leads to wealth destruction is corporate officials’ adverse attitude that fails tosee the importance of EVA. If a management’s compensation is linked to economic performance of acorporation, it can have a significant impact on the business strategies of the corporation sector (Ooiand Liow, 2002). Bonuses and incentive pay schemes should be built around the managers’ ability (orlack thereof) to generate positive EVA within their own areas of responsibility. Positive paymentsshould be accrued to managers whose divisional profits are more than the divisional costs, whereasnegative incentive plans should be used if long-term divisional profits fall short of divisional costs.Thus, in this way, EVA can provide an incentive to corporation managers to act like shareholders, andinvestment decisions would be made on the basis of whether they would yield positive EVA or not(Ray, 2007).Copyright © 2012. Academy of Knowledge Process32

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.com7. SUMMARY AND CONCLUSIONShareholder value maximization has become the predominant goal of corporations in India and theworld over. To achieve such goal, it is important for corporations to device performance measures thatare aligned towards the firm’s goal of shareholder value enhancement. Many consulting firms havecome up with different value-based measures (VBM) of performance, such as, Economic ValueAdded (EVA), cash flow return on investment, and Total Shareholder Return (TSR) to cater to theabove need. Of these measures, EVA has become quite popular in India. The proponents of EVA,Stern Stewart & Co., claim that EVA is superior to other metrics, as it is the financial performancemeasure that comes closer than any other measure, in capturing the true economic profit of anenterprise, helps managers to make better decisions and motivates them to perform better. The EVAhas attracted many of the world’s best managed and largest corporations to implement EVA asperformance measurement system, such as, AT&T, Bausch & Lomb, Briggs and Stratton, Coca-Cola,Du-Pont, Eli Lilly, General Electric, General Motors, Herman Miller, IBM, Pepsi, Quaker Oats,Siemens, US Postal Service, etc. The clarity that EVA has brought to the pursuit of shareholder valuehas led more than 500 corporations to adopt the discipline since Stern Stewart Co. introduced the newsystem way back in 1982.In a market-driven Indian economy, there are a number of firms that create wealth, whereas a largemajority of them destroys it. Corporations need to improve their financial performance from the pointof view of shareholder’s value addition. Non-creation of EVA leads to investor dissatisfaction. This inturn affects the equity mobilization activities of corporation sector that significantly impact theeconomy (Reddy et al., 2011). EVA is both a measure of value and also a measure of corporateperformance. First, the value of a business depends on investor’s expectations about the future profitsof the enterprise. Stock prices track EVA far more closely than they track earnings per share, or returnon equity. A sustained increase in EVA will bring an increase in the market value of the corporation.Second, as a performance measure, EVA forces the organization to make the creation of shareholdervalue the number one priority. Under the EVA approach stiff charges are incurred for the excessiveuse of capital. EVA focused corporations concentrate on improving the net cash return on investedcapital. In this context, it is relevant to see whether corporate-sector is earning returns on their cost,and thereby creating wealth for their shareholders. In fact, EVA, being a value-based measure, assistsinvestors with wealth discovery and corporate-selection processes. Since creating shareholder valuehas become the widely accepted corporate objective nowadays, EVA deals with accounting for thecost of capital and determines the sufficiency or insufficiency of earnings generated by a firm to coverthe cost of capital, i.e., whether a firm is a value generator or a value diluter. Unfortunately, investors’hard-earned money is still being misused in unprofitable projects, resulting in shareholders’ wealthdestruction (Sakthivel, 2010). The need of the hour is to improve the practices prevalent in thecorporate-sector of India today. But, despite being touted as “today’s hottest financial idea and gettinghotter,” it is by-and-large being ignored by the corporate-sector, professionals and government bodiesin India. Recently, a number of corporations have started disclosing EVA statements, as additionalinformation, in their Annual Reports. Unfortunately, annual published reports still lack transparencyand adequate disclosures.The present study examined the value creation strategies of the selected Indian corporations byanalyzing whether the EVA better represents the market value of corporations in comparison toconventional performance measures. In this regards, “EVA and the conventional measures ofcorporate performance, such as, RONW, ROCE and EPS were analyzed by using ANOVA, Trendanalysis, and Regression analysis.” The analysis of the result reveals that “the EVA in absolute figuresof BHEL, L&T and TCS has increased over the study period. Higher variability in EVACE is seen inL&T. ROE values showed fluctuating trend during the study period. It is seen that consistency in EPSwas marked by TCS followed by Infosys and L&T. However, Hero MotoCorp has recorded EPS thatshowed variability on a higher magnitude during the study period. It is clear from the results ofANOVA that EVACE, ROCE, ROE and EPS of sample corporations differ significantly. In addition,the differences between the original and trend values were not very significant in statistical sense andthe same is attributed to sample fluctuations. Further, the EVACE and ROCE were highly correlatedand were statistically significant at 5% level of significance in case of three corporations, namely,33Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comHero MotoCorp, Infosys and L&T.” However, from this study it can be suggested that “Indian listedcorporations should improve their EVA to the shareholders by considering the cost of capital invested.Because positive reported earnings not always provide additional value.” As for the shareholders, theyneed to be aware of the value created by the management of the corporation. Corporations in higherEVA should provide benefits in the long-run; that is, while the capital invested by the shareholdersproduces value, the corporation also generates more profit from its operation.The empirical results of the study do not support the claim that EVA is a better performance indicatorthan traditional accounting measures in explaining market value. This implies that there are otherfactors that drive market value and should be taken into account for shareholders’ value creation orfor performance measurement. As suggested by Chen and Dodd (2001), there are various factorsrelated to customers, employees and community satisfaction, product quality, R&D innovations thoseaffect the market value of firms apart from financial variables. Keeping in view the limitations of thisstudy, further research studies may be undertaken to explore the impact of disclosure of EVAstatements in annual reports on the share prices of a large sample of corporations. At present, “itseems prudent to use both traditional metrics and value added metrics, accompanied by informationthat explains how the less familiar value-added metrics work. Reliance on a single measure is notwarranted.” The advent of this concept has provided flexibility to the management in measuring theperformance of their business operations.The EVA analysis has attracted much attention in the Western countries, both as a managementinnovation, as well as, stock market analysis. The acceptance of such a technique in the Indiancontext, however, shows somewhat diverse trends. Some exemplary corporation houses (like Infosys,Wipro, HCL, TCS, NIIT, BPL, BHEL, Hindustan Unilever, Hero Honda, Godrej Industries, TISCO,Ranbaxy Laboratories etc.) have been separately publishing “EVA Statements, on a continuing basis,in their Annual Reports as part of financial statements.” However, a vast majority of the corporationsare still not willing to install the EVA technique for evaluating their financial performance because ofcertain ‘inherent’ difficulties associated with the computation. Again, it is observed by some scholarsthat in the Indian context, it may be very difficult task to establish the existence of any relationshipbetween stock price and economic value added (EVA). In a developing economy like India,depending on EVA could be an obstacle in making ‘new-investment’ decisions. Moreover, whentalking about shareholders’ value creation, the profile of the shareholders also needs to be taken care.The growth of the Indian Capital Market has increased the pressure on the corporations to consistentlyperform better. No enterprise survives or grows if it fails to generate wealth for the ultimatestakeholders. Profit maximization is “age-old, wealth maximization is matured and valuemaximization is today’s wisdom.” An enterprise can exist without making profits but it cannot survivewithout adding value. An enterprise not making profits shall turn into poor health (like severalcorporations in the public sector), but not adding up value may cause its termination over a period oftime (Singh, 2004, 2011). In the present era of globalization, the corporate-sector in India is graduallyrecognizing the importance of EVA as a result of which some Indian corporations have startedcalculating EVA, making disclosures in their Annual Reports and also using EVA for differentmanagerial purposes. Moreover, some leading corporations have also started using EVA forimproving their internal governance. For example, TISCO Limited is using EVA to measureperformance of its mines and other business segments. Managers of the corporation find the measurequite useful and are highly enthused by the use of this measure. Similarly, TCS Limited hasimplemented “EVA as a performance measurement and evaluation system linked with incentive”(Ray, 2007). It is expected that EVA will soon gain popularity more as a management planning andcontrol tool. Undoubtedly, EVA is gaining recognition as a fundamental measure of corporationperformance despite the fact that it has been in existence for a relatively short period of time.Copyright © 2012. Academy of Knowledge Process34

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comTable 14: Indian Corporations and EVA ReportingCorporation Usage of EVAInfosys Limited EVA is used as a tool to tell its clients that the value delivered by Infosys isgreater than what the client pays for.Marico Industries As a signaling device to tell its employees that capital and its betterLimitedutilization is important.Dr. Reddy’sAs a qualifying criterion to grant rewards, such as, a variable pay, stockLaboratoriesoptions and performance bonuses etc.TCS Limited EVA is linked to compensation system and has been implemented in greatdetail.BHELEVA is linked with the corporation’s business strategy and values, alongwith discharge of economic and social responsibility.Hero Honda Limited EVA is linked with the performance appraisal system, giving reward to theemployees and analyze value creation processes.Hindustan Uniliver EVA is used as a basis to measure the performance of each of its division.LimitedEVA locates performance on the basis of operating profit after charging thecost of capital.Godrej Industries EVA is used not only as a financial, but also as a way of structuringperformance-linked variable remuneration. EVA has been a tool to measure,motivate, manage and finally, overhaul the mindset of people.(Source: Compiled from annual reports of the sample corporations.)In the present era of globalization, corporations of emerging economies are facing new challenges.Indeed, EVA disclosure in annual reports should be taken as a challenge thrown on the Indiancorporate-sector, and corporate leaders should respond in a ‘positive’ way so as to develop confidenceamong all the stakeholders. Corporations in India, therefore, must strive hard to maximize theirshareholders value/wealth without which their stocks can never be fancied by the market.Accordingly, we recommend to the national regulatory agencies, viz., Security and Exchange Boardof India (SEBI) and Institute of Chartered Accountants of India (ICAI) as: “EVA statements shouldform part of the audited annual published accounts of the Indian public corporations so as to bringmore transparency and better disclosure practices to catch the faith of the world business communityon the Indian stock market in the long-run.”REFERENCESAbdeen, H. and Haight, G.T. (2002) ‘A fresh look at economic value added: empirical study of theFortune-500 companies’, The Journal of Applied Business Research, Volume 18, Spring,Issue No. 2, pp. 27-36.Anderson, A.M., Bey, R. P. and Weaver, S. C. (2004) ‘Economic value added adjustments: much todo about nothing’, Paper presented at the Midwest Finance Association Conference, Sept.2004, San Antonio, USA.Banerjee, A. (2000) ‘Linkage between economic value added and market value: an analysis’, Vikalpa,Vol. 25, No. 3, July-Sept. pp. 23-36.Bao, B.H. and Bao, D.H. (1999) ‘The association between firm value and economic value added’,Indian Accounting Review, Vol. 3, Issue 2, pp. 161-64.Bhattacharya, A.K. and Phani, B.V. (2000) ‘Economic value added: in search of relevance’, Decision,Vol. 27, No. 2, IIM Calcutta, pp. 25-54.Brewer, P.C. Chandra, G. and Hock, C.A. (1999) ‘Economic value added: its uses and limitations’,Sam Advanced Management Journal, Vol. 64, No.2, pp. 4-11.Chary, L., and Mohanty, R. (2009) ‘Understanding value creation: the shareholder value perspective’,LBS Journal of Management and Research , Volume 7, Issue No. 1&2, pp. 12-26.Chattopadhaya, A. and Rakshit, D. (2010) ‘Measures of shareholders’ value creation: an assessment’,Vidyasagar University Journal of Commerce, Volume 15, Issue 3, March, pp. 5-21.Chen, S., and Dodd, J. (1997) ‘Economic value added: an empirical examination of a new corporateperformance measure’, Journal of Managerial Issues, Volume 9, Issue No. 3, pp. 318-333.Copyright © 2012. Academy of Knowledge Process35

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comChen, S., and Dodd, J. (2001) ‘Operating income, residual income and EVA: which metric is morerelevant?’, Journal of managerial issues, Volume 13, Issue No. 3, pp. 65-86.Damodaran (2002) ‘Corporate Finance: Theory and Practice’, John Wiley and Sons, New York, USA.De Wet, J. (2005) ‘EVA versus traditional accounting measures of performance as drivers ofshareholder value: a comparative analysis’, Meditari Accountancy Research, Volume 13,Issue No. 2, pp. 1-16.Dubey, R. (2000) ‘Understanding the real measure of performance: EVA’, Business Today, Feb. 22-Mar. 6, pp.94-98.Fernandez, P. (2003) ‘EVA, economic profit and cash value added do not measure shareholder valuecreation’, Journal of Applied Finance, Volume 9, Issue No. 3, pp. 74-94.Grant, J.L. (1996) ‘Foundation of EVA for investment management: just in time, EVA’, Journal ofFinancial Management, Volume 23, Issue No. 1, pp. 41-45.Irala, L. R. (2007) ‘Corporate performance measures in India: an empirical analysis’, SSRN workingpaper series WP-2007/01/A. Retrieved December. SSRN whtpp:??ssrn.com/abstract=964375.Irala, L.R. (2005) ‘Economic value added: the right measure of managerial performance’, IndianJournal of Accounting and Finance, Volume 119, Issue No 2, April-Sept. pp. 1-10.Ismail, I. (2008) ‘Performance of public-listed companies in Malaysia: using EVA’, [Online]Available: www.griffith.edu.au/school/gbs/afe/symposium/2008/Ismail.pdf.Kaur, M., and Narang, S. (2009) ‘Insights on shareholder value addition from India’s wealth club: Astudy of selected companies’, The IUP Journal of Accounting Research & Audit Practices,Volume, 8, Issue No 3&4, pp.20-51.Keys, D.E., Azamhuzjaev, M. and Mackey, J. (2001) ‘Economic value added: a critical analysis’,Journal of Corporate Accounting & Finance, Volume 12, Issue No. 2, pp. 65-71.KPMG-BS (1998) ‘Corporate India: an economic value added scoreboard’, The Strategy, pp. 22-25.Kumar, S. and Sharma, A.K. (2011) ‘Association of EVA and accounting earnings with market value:evidence from India’, Asia-Pacific Journal of Business Administration, Volume 3, Issue No.2, pp.83-96.Kyriazis, D., and Anastassis, C. (2007) ‘The validity of the economic value added approach: anempirical application’, European Financial Management, Volume 13 Issue No. 1, pp. 71-100.Lander, G.H. and Reinstein, A. (2005) ‘Corporate governance and economic value alignment’,International Advances in Economic Research, Volume 11, Issue No. 4, pp. 433-447.Lee, S. and Kim, W.G. (2009) ‘EVA, refined EVA, MVA or traditional performance measures inhospitality industry’, International Journal of Hospitality Management, Volume 28, Issue No.3, pp. 439-445.Luber, R.B. (1996), ‘Who are the wealth creator?’, Fortune, pp. 2-3.Mangala, D. and Simpy, J. (2002) ‘Linkage between EVA and MVA: an analysis in Indian context’,Indian Management Studies Journal, pp. 55-65.Misra A. and Kaanwal (2004) ‘Linkages between EVA and share prices: an empirical study of Indiancorporate sector’, available at http://www.iiml.ac.in/conference/abstracts/16.pdf.Misra, A. and Kanwal, A. (2007) ‘Economic value added as the most significant measure of financialperformance: a study of select Indian firms’, Journal of Internal Business and Economics,Volume 7, Issue No.1, pp. 76-85.O’Bryne, S.F. (1996) ‘Economic value added and market value’, Journal of Applied CorporateFinance, Volume 9, Issue No. 1, pp. 116-125.Ooi Joseph, T.L. and Liow, K.H. (2002) ‘Real estate corporations: the quest for value’, Journal ofProperty Investment and Finance, Volume 20, Issue No. 1, pp. 23-35.Panahian, H. and Mohammadi, H. (2011) ‘Relative and incremental information contents of EVAand refined EVA used for prediction of the income’, European Journal of Economics,Finance and administrative sciences, Issue 28, pp. 96-103.Patel, R. and Patel, M. (2012) ‘Impact of EVA on share price’, International Journal ofContemporary Business Studies, Volume 3, Issue No. 1, January, pp. 24-34. Available onlineat http://www.akpinsight.webs.com.Peterson, P.P., and Peterson, D.R. (1996) ‘Company performance and measures of value added’Charlottesville, VA: The Research Foundation of the Institute of Chartered Financial Analyst.Raiyani, J.R. and Joshi, N.K. (2011) ‘EVA based performance measurement: a case study of SBI,HFDC Bank’, Management Insight, Volume 7, Issue No. 1, June, pp. 31-43.36Copyright © 2012. Academy of Knowledge Process

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comRakshit, D. (2006) ‘EVA based performance measurement: a case study of Dabur India Limited’,Vidyasagar University Journal of Commerce, Volume 11, Issue No. 3, March, pp. 40-59.Ray, K. K. (2007) ‘Value-based management strategy: an alternative approach to executivecompensation at TCS’, The ICFAI Journal of Business Strategy, Volume 4, Issue No. 4, pp.31-44.Ray, R. (2001) ‘Economic value added: theory evidence, a missing link’, Review of Business, Volume22, Issue No. 1&2, pp. 66-70.Reddy, N.R.V.R., Rajesh, M., Reddy, T.N. (2011) ‘Valuation through EVA and traditional measures:an empirical study’, International Journal of Trade, Economics & Finance, Volume 2, IssueNo.1, February, pp. 19-23.Sakthivel, N. (2010) ‘EVA-MVA: shareholders value measures’, The Management Accountant,Volume 45, Issue No. 1, January, pp. 10-14.Sarkar, P. (2011) ‘Disclosures in corporate annual reports: a case study of some selected publiclimited companies in India’, The Chartered Accountant, October, pp. 64-70.Sharma, A.K. and Kumar, S. (2010) ‘Economic value added: literature review and relevant issues’,International Journal of Economics and Finance, Volume 2, Issue No.2, May, pp. 200-220.Sharma, A.K. and Kumar, S. (2012) ‘Economic value added versus conventional performancemeasures: evidence from India’, Proceedings of ASBBS Annual Conference, Las Vegas,Volume 19, Issue No.1, February, pp. 804-815.Shil, N.C. (2009) ‘Performance measures: an application of EVA’, International Journal of Business& Management, March, Vol. 4, No. 3, pp. 169-177.Singh, K.P. (2004) ‘Appearance of EVA in Indian corporates: an empirical study’, The BusinessReview, Volume 11, Issue No. 1, pp. 4-19.Singh, P.K. (2011) ‘Enhancement of value for corporate reporting in current competitive era’, TheChartered Accountant, August, pp. 94-105.Sivakumaran, D. and Sarvanakumar, M. (2011) ‘A recent analysis with respect to EVA and shareprice behavior of Indian Banks’, European Journal of Economics, Finance andAdministrative Sciences, Issue No. 42, pp. 112-120.Stern J. (2004) ‘Corporate governance, EVA and shareholder value’, Journal of Applied CorporateFinance, Volume 7, Issue No. 2, pp. 71-84.Stewart, G.B. (1991) ‘The Quest for Value: A Guide for Senior Managers’, First edition, HarperBusiness, NY.Stewart, G.B. (1994) ‘EVA: fact or fantasy’, Journal of Applied Corporate Finance, Volume 16,Issue No. 2-3, pp. 91-99.Taggart, J.M., Kones, P. and Mankins, M. (1994) ‘The value imperative: managing for superiorshareholder returns’, Free Press, New York.Thenmozhi, M. (1999) ‘Economic value added as a measure of corporate performance’, The IndianJounal of Commerce, Volume 52, Issue No.4, pp. 72-88.Vijaykumar, A. (2010) ‘Economic value added and market value added: an empirical study ofrelationship’, College Sadhana, Volume 2, Issue No. 2, pp. 141-148.Vijaykumar, A. (2011) ‘Economic value added and shareholders wealth creation: a factor analyticapproach’, Research Journal of Accounting and Finance, Volume 2, Issue No. 12, pp. 22-37.Vijaykumar, A. (2012) ‘EVA and other accounting performance indicator: an empirical analysis ofIndian automobile industry’, International Journal of Management and Technology, Volume2, Issue No. 3, pp.131-153.Weaver, S.C. (2001) ‘Measuring economic value added: a survey of the practices of EVAproponents’, Journal of Applied Finance, Volume 11, Issue No. 1, pp. 50- Available atSSRN: http://ssrn.com/abstract=285562.Worthington, A.C., and West, T. (2004) ‘Australian evidence concerning the information content ofeconomic value added’, Australian Journal of Management, Volume 29, Issue No. 2, pp. 201-224. Available online at www.griffith.edu.au/school/gbs/afe/symposium/2008/Ismail.pdf.Young, D.S. and O’Byrne, S.F. (2003) ‘EVA and value based management’, Tata McGraw-HillPublishing Company Ltd., New Delhi.Copyright © 2012. Academy of Knowledge Process37

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comA Study of Customer’s Perceptionregarding E-Banking ServicesAnupam SharmaResearch Scholar, School of Mgmt. & Social Sciences, Thapar University, Patiala.ABSTRACTEmergence of globalization and liberalization lead to the lots of developmentsin the almost every field. Every sector and every field is affected by the marketchanges. Banking is from one of those fields. E- Banking service provided bybanks now a day is also result of changing market demands. In the presentresearch paper customer’s perception regarding E- banking services has beenundertaken. Study will through light on the scope of Internet Banking in future.Objectives of the research are: To study the problems faced by the consumersin availing the internet banking services. To access the satisfaction levelexperienced by the users of internet banking services.Keywords: Globalization, Liberalization, E- Banking, Internet BankingINTRODUCTIONWith the introduction of globalization the E-Banking Sector has certainly become most important,with banks because the information age is changing the face of banking. Customers arediscriminating, and expect the banks to keep up with fast-breaking changes in technology. The bankswant to make sure that the customer gets what he wants it, as customer is the king in today’s worldand that the staff can render good service to customers because good customer service translates intoloyal customers.Traditionally the banks were functioning from premises conveniently located and the customers hadto visit the bank to transact business but the development of the technology over the past decade hastotally changed the characteristic of the banking industry. With the advancement of technology, PhoneBanking, Mobile Banking, ATM Cards have been discovered, only this has made it possible to put theATM on the roads, on ships and even on airlines. Customer’s satisfaction, need of E-Banking inbanks, various developments in E-Banking Services.Given these factors, a need was felt to gather some research work related to services of Electronicbanking and customer's perspective regarding various E-Banking Services and future of E-Banking,since the same was unavailable.OBJECTIVE OF THE STUDY1. To access the present scenario of the services of Internet Banking.2. To study the scope of Internet Banking in future.3. To study the problems faced by the consumers in availing the Internet Banking Services.4. To access the satisfaction level experienced by the users of Internet Banking ServicesCopyright © 2012. Academy of Knowledge Process38

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comSCOPE OF THE STUDYThe project is based on the study of E-Banking services of private banks. It includes the customerbehavior and preferences towards the E-Banking services in the Chandigarh city. The current studyalso covers the analysis of the dissatisfaction among the different customers from these services. Sothe scope of the study is limited to the Chandigarh only.The current Project also covers the study of the awareness level of the people about the E-BankingServices in the Chandigarh City. The study also emphasize on the market potential for the new ATMsin the city.RESEARCH METHODOLOGYResearch Methodology is the way to systematically solve a problem. Research Methodology is preparedto describe not only the Research procedure and method adopted for the achievement of the objective ofthe project but the logic behind the use of this methodology is that the result can be capable of beingevaluated by others. Research is search for information. Research is an academic activity and as suchthe term should be used in technical sense.Problem Defining: The project was mainly concerned with evaluating the performance of InternetBanking Services and finding out the scope of Internet Banking Services by doing a comparativeanalysis of the Internet Banking Services provided by ICICI BANK and HDFC BANK.Sample Unit: Individuals who are availing Internet Banking Services.Sample Size: 150 respondentsSampling Method: Convenience sampling.Sampling Area: ChandigarhSources of Data: The data was collected from both primary and secondary sources.Primary Data: The primary data collection was done through the survey method. The survey wasconducted using the questionnaire method.Secondary Data: Secondary data was collected from the following sources:a) Books on Internet Bankingb) Internetc) JournalsICICI Bank and HDFC BankE-BANKING SERVICES PROVIDED BYVARIOUS BANKSInternet banking services provided by ICICI bank is as follows:Bill paymentOnline shoppingTicket bookingInsurance policies offered by ICICI bankICICI bank’s online share tradingInternet banking services provided by HDFC bank is as follows:Credit card PaymentStatement DownloadChange Customer profileFunds TransferNew Fixed Deposit RequestFixed Deposit InquiryDemand Draft RequestTDS InquiryStop Payment RequestCheque Status InquiryCopyright © 2012. Academy of Knowledge Process39

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comCheque Book RequestAccount Balance InquiryCOMPARISON: INTERNET BANKING SERVICES PROVIDED BY ICICI BANKAND HDFC BANK1. BILL PAYMENTICICI Bank: ICICI Bank has tied up with more than 60 organizations across the country tofacilitate payment of bills for Utility Companies (Electricity and Telephone) Bills, ICICIBank credit card, Mobile Phone and Insurance Premium bills. For the customers ease thebank has enabled the billers in following two modes:Presentment Type Billers: For these billers, the bill amount and due date will be presentedto the customers online and a reminder will be sent to them on Email.Payment Type Billers: For these billers the customers can register and pay any amountimmediately.HDFC Bank: HDFC Bank provides the luxury of paying its customer’s telephone, electricityand mobile phone bills at their convenience through the Internet, ATMs, your mobile phoneand telephone. LIC insurance premiums can also be paid through this facility.It is better for the residents of Hyderabad or Secunderabad who can get registered for HdfcNet Banking service. Thanks to the bank’s tie-up with e-seva, a unique integrated servicelaunched by the government of Andhra Pradesh, now these residents can pay their electricitybills, water bills and municipal taxes (telephones to be introduced shortly) through theInternet using the Direct Debit option. The most important aspect of this service is that thepayments made are updated in the database of the utility companies on an online and realtimebasis.2. ONLINE SHOPPINGICICI Bank: ICICI Bank has tied up with more than 75 organizations to facilitate onlineshopping for all its Internet Banking Customers. They can now choose their products onlineand pay conveniently through ICICI Bank Internet Banking Service.HDFC Bank: The Easy Shop Gold Debit Card of the HDFC Bank is the first Gold DebitCard in India. Not only does it replace the customer’s ATM card, it also revolutionizes theway the customers spend through a Debit Card. This card can be used in India and abroad atmerchant locations such as shops and restaurants and to withdraw cash from a widespreadnetwork of ATMs. The value of the payment made or cash withdrawn is instantly debitedfrom customer’s account. While all the purchases and cash withdrawals are in the currency ofthe country in which the customer is in, the customer’s account is debited in Rupees.3. TICKET BOOKINGICICI Bank: With ICICI Bank one need not visit Train/ Air ticket booking reservationcenters any more. One can now buy the tickets online and pay using ICICI Bank’s InternetBanking Facility. ICICI Bank has tied up with IRCTC (for Railway Ticket Booking) and AirDeccan (for Air Ticket booking).HDFC Bank: It does not provide online booking of tickets.4. INSURANCE SERVICEICICI Bank:ICICI Bank now offers its customers the most comprehensive suite ofGeneral Insurance products from ICICI Lombard, to cater to their insurance needs and thattoo online.HDFC Bank: It does not provide online Insurance Service to its customers.5. ONLINE SHARE TRADINGICICI Bank: It offers online share trading service to its customers through ICICIdirect.com.Copyright © 2012. Academy of Knowledge Process40

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comHDFC Bank: The bank does not provide Online Share Trading services to its customers butit provides advice on direct equity through research reports based on fundamental andtechnical parameters across individual stocks/model portfolio/customized client portfolios.Research recommendations are generated by bank’s Equity Research team and coverdifferent risk parameters and time horizons.6. SMS ALERTSICICI Bank: ICICI Bank offers Mobile Banking facility to all its Bank, Credit Card andDemat customers. ICICI Bank Mobile Banking enables its customers to bank while being onthe move. ICICI Bank Mobile Banking can be divided into two broad categories Requests AlertsMobile Banking Requests: ICICI Bank Mobile requests provide its customers with thefollowing requests:a) Bank Requestsb) Credit Card Requestsc) Demat RequestsMobile Banking Alerts: ICICI Bank Mobile alerts provide its customers with the followingalerts:a) Bank Alertsb) Credit Card Alertsc) Demat AlertsHDFC Bank: HDFC Bank presents Mobile Banking service. Now one can access his/herbank account and conduct a host of banking transactions and inquiries through the bank’sMobile Banking service. One can check his/her balance, stop a cheque payment, or even payyour utility bills. This bank’s Mobile Banking service gives account information and realtimetransaction capabilities from the mobile phones at a true "anywhere, anytime, anyhow"convenience.7. ATM SERVICEICICI Bank:ICICI Bank's 24 Hour ATM network is one of the largest and most widespread ATMNetwork in India. ICICI Bank’s ATMs are located in commercial areas, residential localities,major petrol pumps, airports, near railway stations and other places which are convenientlyaccessible to the customers. ICICI Bank ATMs features user-friendly graphic screens witheasy to follow instructions. The bank has introduced ATMs which interact with customers intheir local language for increased convenience.HDFC Bank: HDFC bank provides ATM services 24 hours a day, 7 days a week, 365 days ayear from any of their over 1054 ATM across India.8. ONEVIEW SERVICEICICI Bank: It does not provide one view service to its customers.HDFC Bank: For the first time in India, this convenient service brings together one’s onlinebank accounts (including those of family members), in one place, in total security. One Viewputs it all on one screen for the customer , so that tracking and managing his/her onlineaccounts becomes quicker and easier than ever before. It gives the customer a completepicture of his/her finances across multiple accounts. If the customer has one or more accountswith HDFC Bank, Citibank, ICICI Bank, HSBC India, Standard Chartered Bank and/orGlobal Trust Bank then One View is just right for him and it's absolutely free.9. PREPAID REFILL OF SIM CARDICICI Bank: It does not provide this service to its customers.HDFC Bank:Copyright © 2012. Academy of Knowledge Process41

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comPre-paid Refill through SMS: A customer needs to be registered for this service.Within seconds he/she will receive an SMS confirming his/her registration, giving his/her acode number and also the syntax of the message that he/she needs to send for getting a refilldone. So now a refill is just an SMS away.10. MUTUAL FUND SERVICEICICI Bank: One can invest in mutual funds through ICICIdirect.com.HDFC Bank: It does not provide investing in mutual funds through its website.11. ONLINE DEMAT SERVICESICICI Bank: ICICI Bank Demat Services boasts of an ever-growing customer base of over 7lacs account holders. In their continuous endeavor to offer best of the class services to theircustomers they offer the following features: Online accesses to his/her demat account. The customers can check their holdings,transactions, details of bills and status of requests and much more. Digitally signed transaction statement by e-mail.Corporate benefit tracking.e-Instruction facility - facility to transfer securities 24 hours a day, 7 days a weekthrough Internet & Interactive Voice Response (IVR) at a lower cost. Dedicated specially trained customer care executives at the bank’s call centre, tohandle all queries of the customer’sHDFC Bank: HDFC Bank provides its customers with online access to his/her DematAccount, so that they can check their holdings using the Net Banking facility. Now thecustomer can convert his/her securities to electronic format with the HDFC Bank DematAccount.ANALYSIS AND DISCUSSIONThe data was collected to analyze the e-banking services provided by the banks which havebeen taken in the study in hand. The required data has been collected through thequestionnaire. Respondents have been asked to give their responses on the given elevenstatements. In the questions which were asked of direct or at the 5-point scale, the analysis ofthe as follows:TABLE-INo. of respondents who have availed the ATM facility of any bankAVAILED THE FACILITY NO.OF RESPONDENTSYes 135No 15Interpretation: From the table given above, it can be seen that out of the 150 respondents,135 have availed the facility of ATM and 15 of them have never availed this facility. The pieCopyright © 2012. Academy of Knowledge Process42

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comchart shows that 90% of the respondents have used ATM while 10% are still not familiar withit.TABLE-IIThe respondents who have used the ATM facility of the following banks:NAME OF THE BANKNO. OF USERSHDFC Bank 38ICICI Bank 53Punjab National Bank 22State Bank of India 22Not used the facility of ATM bank 15Interpretation: It is clear from the table that 38 respondents out of the total 150 used theHDFC bank’s ATM facility, 53 respondents used the ICICI bank’s ATM facility and 22respondents used the ATM facility of each of the Punjab National Bank and State Bankof India. 15 respondents have never used the ATM facility of any of these banks.35.3% of therespondents used the ATM facility of ICICI Bank, 25.3% used that of the HDFC Bank’s and14.7% of the respondents used both Punjab National Bank’s and State Bank of India’s ATMfacility whereas 10% of the respondents have never used this facility of any of these banks.TABLE-IIIThe satisfaction level experienced by the ATM usersLEVEL OF SATISFACTIONNO. OF USERSHighly Satisfied 30Satisfied 105Indifferent 0Dissatisfied 0Highly Dissatisfied 0Copyright © 2012. Academy of Knowledge Process43

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comInterpretation: According to the data given in the table, 30 respondents are highly satisfiedwith the ATM facility of the bank they are dealing with and 105 0f the respondents aresatisfied with their bank’s ATM facility. The graph above shows the percentage ofsatisfaction level experienced by the ATM users in which 77.8% of the respondents aresatisfied, 22.2% are highly satisfied whereas none of the ATM users are dissatisfied.TABLE-IVFollowing number of times in a week the users have used the ATM:NUMBER OF TIMESNUMBER OF USERS1 812 273 184 or more 9Copyright © 2012. Academy of Knowledge Process44

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comInterpretation: In the table it is shown that the 81 respondents used the ATM facility onetime in a week, 27 use it two times in a week, 18 respondents use them three times in a weekand 9 uses them four or more times in a week. According to the graph, 60% of therespondents avail the ATM facility one time in a week, 20% do it two times in a week, 6.7%used it three times in a week, 13.3% used it four times or more in a week.TABLE-VPreference of the users of ATM card due to the benefits:BENEFITS OF ATMNUMBER OF USERSTime-saving 7Quick Cash Withdrawal 93Convenient 1024 hour facility 25Interpretation: The graph given above shows the percentage of the users giving theirpreference to the benefits of the ATM.68.9% of the users were of the view that it providesquick withdrawal of the cash, 18.5% were of the view that its 24 hour facility for providingthe cash is an important benefit of the ATM whereas 7.4% felt that it is convenient source ofcash withdrawal and 5.2% were of the view that it is a time saving facility for getting cashreadily.TABLE-VI (A)Whether the users of ATM card have faced any problem while using the ATM card:NATURE OF THE ANSWERNO. OF ATM USERS FACING THE PROBLEM ONUSAGE OF ATMYES 54NO 81Copyright © 2012. Academy of Knowledge Process45

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comInterpretation: From the table given above it is clear that 54 ATM users faced problemwhile using the ATM whereas 81 users faced no problem while using it. According to thegraph 60% of the users never faced any problem on using it but 40% of the users faced somesort of problem in its use.TABLE-VI (B)Problems faced by the users:NATURE OF PROBLEMNO. OF USERSThe card got withheld in the machine 34ATM was not working 85Instructions to use the ATM were not clear and 16received no help from employees of the bankCopyright © 2012. Academy of Knowledge Process46

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comInterpretation: The graph given above tells about the nature of problem faced by the ATMuser while using the ATM.25.2% users faced the problem that their ATM got withheld in theATM machine, 63% users faced the problem of non- working of the ATM machineand11.85% users said that the ATM usage instructions were not clear and there was no helpfrom the employees also.TABLE-VIIOther Internet Banking Services availed by the respondents:NATURE OF SERVICENO. OF USERSCredit card 35Transferring one’s money from one city to any otherbranch in a cityOpening Fixed Deposit account via The Internet 25Inquire about the balance in one’s saving, Current and 0FD accountTax deducted at source on one’s FD account for currentfinancial yearGiving instructions over the internet for stoppingpayments on chequesRequest for a cheque book via the internet 10View all transactions on an account for a specifiedperiod and get a copy via e-mailNone of the above 755000Copyright © 2012. Academy of Knowledge Process47

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comInterpretation: The table given above tells us about the other internet services availed by therespondents. It shows that 35 of the total respondents use the credit card, 5 respondents usemoney transfer facility, 25 respondents use the internet service for opening the fixed depositand 10 use it to request for a cheque book whereas the remaining respondents do not use itfor these purposes. Here the graph shows the percentage of the respondents availing otherinternet services like credit card, opening the fixed deposits, etc.TABLE-VIIIWhether the respondents ever had any grievance against the bank providing InternetBanking Services to it:RESPONSENO. OF USERSYES 7NO 143Copyright © 2012. Academy of Knowledge Process48

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comInterpretation: According to the data shown in the table, 143 respondents do not haveany grievance against the bank and only 7 respondents had the grievances. The percentageof these respondents comes out to be 95.3% and4.7%, respectively as shown in the graph.TABLE-IXLevel of satisfaction experienced by the respondents from the grievance handlingprocedure of the bank:LEVEL OF SATISFACTIONNO. OF USERSHighly Satisfied 6Satisfied 144Indifferent 0Dissatisfied 0Highly Dissatisfied 0Interpretation: The graph here shows that 96% of the respondents were satisfied withthe grievance handling procedure of the banks and 4% of the respondents were highlysatisfied with it.TABLE-XRespondent’s opinion of the weaknesses of Internet Banking Services:WEAKNESS OF IBSNO. OF USERSThere is only one way communication 66The security is not flawless 45Lack of firsthand experience gained by a39person by visiting a bank is not thereCopyright © 2012. Academy of Knowledge Process49

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comInterpretation: It can be seen from the table that 66 respondents were of the view thatInternet banking services allows to have only one way communication at a time. The other 45respondents said that the security is also not flawless i.e. there is always fear of security inthese type of services. Rest of the 39 respondents was not thoroughly familiar with thissystem as they had lack of firsthand experience. This is explained further with the help of agraph wherein it is expressed in the percentage form.TABLE-XI (A)Respondent’s view of the security of the Internet Banking Services:RESPONDENT’S VIEWNO. OF RESPONDENTSIt is secure 70It is not secure 80Copyright © 2012. Academy of Knowledge Process50

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comInterpretation: The table shows that 70 respondents felt that the Internet Banking Services aresecure while the rest of them felt that these are not secure. As shown in the graph above 46.7% ofthe respondents feels that the Internet Banking Services are secure and 53.3% feel that it is notsecure. It is not secure because there is always a risk from the hackers who may hack thepassword of one’s account and may manhandle one’s account or transfer money from one’saccount to their own account. This opinion is supported by 100% of the respondents who are ofthe view that Internet Banking is not secure.TABLE-XI (B)It is secure becauseREASONSNO. OF RESPONDENTSThe security systems are reliable 63There are firewalls which strengthens thesecurity system7Copyright © 2012. Academy of Knowledge Process51

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comInterpretation: 90% of the respondents who feel that the Internet Banking Service is secureare of the view that it is because of the reliability of the security systems and 10% of themfeel that firewalls that strengthens the security system.FINDINGS1. Most of the respondents used ATM facility (90% of them availed this facility.)2. Respondents were using the ATM facility of ICICI bank more than the HDFC bank.3. Most of the respondents were satisfied by the ATM facility being used by them.4. Most of the respondents used ATM facility once in a week.5. Most of the respondents feel that the benefit of the ATM card is that it comes handywhen cash is needed urgently.6. 60% of the respondents faced no problem in using the ATM while 40% of the respondentsfaced a problem while using the ATM.7. A major problem faced by the respondents while availing ATM card facility was that theATM was not working and the second common problem was that the card got withheld in themachine.8. Most of the respondents used very less Internet Banking facilities other than the ATM.Out of the other facilities; credit card was the most commonly used service and the secondservice used was opening a Fixed Deposit account via the internet.9. 95.3% of the respondents didn’t have any grievance against the bank providing them theinternet services and the 4.7% respondents which had a grievance against bank providingthem the internet banking services were satisfied through the grievance handling procedure ofthe bank.10. Most of the respondents felt that the weakness of internet banking is that it is a one waycommunication and the second most commonly held weakness was that it is not secure.11. 53.3% of the respondents felt that Internet Banking is not secure and the reason behindthis is that hackers may hack the password of one’s account and this may result in hugelosses to the user of Internet Banking.CONCLUSIONWith the presence of E-Banking, the scenario of the old Banking System has got the newoutlook. Now there is no need to stand in long queues to deposit cash, to pay bills etc.because E-Banking has made the banking system more convenient and time saving. ThisCopyright © 2012. Academy of Knowledge Process52

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comensures the speed, accuracy and safety. But many persons are unaware regarding the benefitsand usage of E-Banking, so there is a need to aware them. Moreover, the customers use theseE-Banking Channels for doing the basic transactions such as balance inquiry; statementinquiry, cash withdrawal and the rest of the transactions are done by very small percentage ofcustomers. In this way, E-Banking Services are not fully utilized by the customers to itspotential.It is concluded that the future of the E-Banking is bright, so as and when the customers areaware and educated about the trend of new system, it will give opportunities for upcominggeneration to pursue in. In this way, the E-Banking will glorify the banking system as awhole.LIMITATIONS OF THE STUDY:-1. Some of the respondents of the survey were unwilling to share the information.2. It was not possible to approach a large no. of respondents to get a broader view of themarket. As the size of the sample is small, so the findings can't be generalized.3. The scope of the study is confined to the private sector banks only and that too inChandigarh City.References1. Internet Banking-The Second Wave: By Sanjeev Singhal,Tata Mcgraw Hill Publication ,20032. Management Trends (A Journal of Department of Business Management)Article- Internet Banking by Kavita Kshatriya Sep 20043. Indian Banking 2005, The ICFAI University Press Publication4. The Journal of Internet Banking and Commerce (Published by Array Development ofOttawa )5. International Journal of Business Performance Management 2002 (Published byInderScience publishers)6. The Small Business Guide to Internet Banking by – Ray Hurst7. Internet Banking Shopping for the Older Generation by ---- Greg Chapman8. Internet Banking: Strategies, Tools and Best Practices – by Mona Brewer(Published by Sheshunoff and Co.)9. Banking and Finance on the Internet (Internet Management Series) by Mary J. Cronin(Published by John Wiley and Sons)10. Successful Web Portals in Retail Banking by--- Daniel Singer, Douglas Ross, AlbertAvery (Published by --- Wiley)Copyright © 2012. Academy of Knowledge Process53

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comThe Need for the Integration of EmotionalIntelligence in Managerial EducationReshu Agarwal*; Pradeep Sharma***Ph. D Research Scholar (IFTM UNIVERSITY), MBA, B. Com.Assistant Professor, RBIT, Agra- UP.- INDIA** Ph. D Research Scholar (IFTM UNIVERSITY), MBA, B. Sc. (Bio. Tech)Assistant Professor Dr. ZHIT, Tundla - UP.- INDIAAbstractThis paper is an attempt to find out various aspects of emotionalintelligence and its implication in managerial education. In this paperwe will discus, how EI help to maintain the result of higher education.This work found that the EI is a proficiency in teacher which helpsthem to retreat their lectures. The paper has also explained the value ofEI. Here EI is present as tool of teachers. This study tells about theimpact of EI on the personality of the student. This study is alsoencouraging the teacher for practical application of EmotionalIntelligence in teaching.Key Words- Emotional Intelligence, Higher Education, Teacher,Student, Result1. INTRODUCTIONAs teachers, our objective is to enhance the academic and social progress of all students. Inorder to reduce classroom disturbance and improve student time on-task, some teachers haveadopted behaviour modification strategies such as assertive discipline.As emotional intelligence involves such skills as motivation and determination, it canplay an important role in achieving goals in various fields of life thereby leading to success.Studies conducted in multiple areas like education, health, work, etc. indicate that emotionalintelligence is related with different aspect of success in life. For example, Fernandes andRego (2004) found that EI is an important predictor of students’ satisfaction with life, healthand academic achievement. The study conducted by Carmeli (nd) revealed significantrelationship of Emotional Intelligence of senior managers with work attitude, workbehaviour, work outcomes and job satisfaction. Khokhar and Kush (2009) found that highemotional intelligence in executives brings about better quality of work performance.MacMullin (1994) found that students’ social and emotional difficulties, and theirinability to use socially skilful ways to gain teacher support, can result in low academicachievement. During our teaching careers, we have encountered numerous students whoprovide clear examples of the effect on learning of inadequately developed emotionalintelligence.2. LITERATURE REVIEWThe term "emotional intelligence" was first used academically in an unpublished 1985doctoral dissertation by the late Wayne Payne. But it was not until 1990 that researchersbegan to develop a working definition of the term. In that year, these researchers, PeterSalovey of Yale and John (Jack) Mayer of the University of New Hampshire published anarticle in an obscure academic journal. They titled their paper, simply enough, EmotionalIntelligence.Copyright © 2012. Academy of Knowledge Process54

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.com1990:-Since 1990 Mayer and Salovey have continued to lead the academic research in thefield of EI. (I've switched the order of their names because after 1990 Mayer took the leadrole in writing most of the journal articles) Around the mid 1990's a third researcher, DavidCaruso, a long time friend of Jack Mayer was asked to help design a test of emotionalintelligence. All together the three researchers have published over 25 articles about EI inpeer-reviewed academic journals and books.In my opinion, Mayer, Salovey and Caruso have shown remarkable integrity in their work.Instead of exploiting their research, they continued to pursue it. Rather than jumping on thebandwagon, they have instead been, as Robert McCrae puts it, "some of the most articulatecritics of the construct." Because I admire their integrity, and because I see much merit intheir work as well as the many problems with the popular definitions and claims, my websitehas been perhaps one of the biggest supporters of the Mayer Salovey Caruso (MSC) model.1997:-In 1997, Mr. Takashi Kosugi, Minister of Education, Science, Sports and Culture at thetime, consulted the Central Council for Education on moral education from early childhood,saying that “it has been pointed out that children these days had not ultivated enough socialskills and self responsibility, so they fail to recognize that socially-prohibited actions are notacceptable for children to do either”. He continued, “It is also said that it becomes moredifficult for children to have empathy and warm-feelings towards others and build goodhuman relationships.” Because of this,2000:-Researchers found that student with high EQ tend to be better learners, more confident,optimistic, creative, as well as being flexible, happier, successful at solving problems, beingable to cope with stress with a higher self esteem, with fewer behavior problems, and alsobeing able to handle emotions much better (Abraham, 1999; Cooper, 1997; Hein, 1996).There are many benefits of using EQ at school both for teachers and for students. Using EQhelps students learn emotional vocabulary and feel cared for rather than controlled. On theother hand, it helps teachers identify the feelings and fears of students, recognizing theirfeelings and see to their unmet emotional needs (Abraham, 1999; Hein, 2001a).2002:-Our elementary school has been designated by MEXT as a pilot school for researchpurposes since 2002 to carry out the newly-developed special educational program “HumanDevelopment”, which is designed to foster “interpersonal intelligence” and “intrapersonalintelligence” (“emotional intelligence”) as well as “nurturance” in children. Implemented asone of the school subjects at every grade level in our school, the class of “Human2007:- Social and emotional competence can be taught and learned when school districtsadopt a coordinated strategy and through a program of staff development, by training teachersand parents to implement a coordinated EQ program (Richardson, 2007).(2010):-Research findings indicate that emotional intelligence skills are important andperhaps critical factors of student achievement, retention, and personal health (Nelson andLow, 1999, 2003, 004, 2005; Epstein, 1998; Bartlett, 2002; Stottlemyre, 2002; Vela, 2003;Chao, 2003; Nelson, Jin, and Wang, 2002; Elkins and Low, 2004; Nelson & Nelson, 2003;Williams, 2004; Potter, 2005; and Smith 2004). Extensive interdisciplinary research indicatesthat emotional intelligence and related non-traditional measures of human performance maybe as or more predictive of academic and career success than IQ or other tested measures ofscholastic ptitude and achievement (Gardner, 1983, 1993, 1997; Sternberg, 1985, 1995;Goleman, 1995, 1997; Dryden and Vos, 1994; Astin and Associates, 1993; Townsend andGephardt, 1997; eisenger, 1985, 1998; Cooper and Saway, 1997; Epstein, 1998; Nelson andLow, 2003; and ow and Nelson 2004, 2005). These findings provide a compelling case forincluding emotional skill development in academic and student services programs in schoolsand colleges.RESEARCH METHODOLOGY For completing this research the study would bedescriptive as well as analytical in nature. To make the study more meaningful and concrete,necessary data would be collected from the relevant sources. Analysis of sample taken fromCopyright © 2012. Academy of Knowledge Process55

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comthe selected cities would be used to draw conclusion and reveal the importance, need, impactand effectiveness of Emotional Intelligence along with the awareness among the teachers ofManagement academic industry.The following strategies have been designed to complete the study:o I would like to do research in the selected topic with my full affords.o Research will fully investigate with every pros-cons of the topic.o Research will be crossed with every ethical aspects of country.Analysis of data for drawing conclusion. In order to achieve the noted objectives, study isbased on primary and secondary data, which includes conducting the survey through welldesigned questionnaires. In addition to this, personal interviews, discussions and relevantmethods would be conducted with the teachers of Management academic industry.RESULTS,Emotional intelligence and college successFor thirty years, there has been a consistent and growing research base that points to the needand value of incorporating personal skills and emotional intelligence into academic andstudent development programs (Nelson and Low, 1977-2006). There are numerous currentexamples of student and academic development programs, interdisciplinary facultyresearch/application projects, doctoral research, and leadership training and development. EIcentricassessment and instructional programs of emotional intelligence skills provide theresearch and applied learning framework for all of these projects. The most important findingand message of this growing research and application base is that improving emotionalintelligence is a key factor in achievement, college success, personal health, careerperformance, and leadership. An important new direction is the use of emotional intelligencein institutional effectiveness. EI assessment, intervention, and evaluation provide a valuableresearch perspective in studying both student performance and institutional effectiveness.Research studies in progress show a positive and significant relationship of EI skills andcompetencies to student achievement and retention. In summary, the research literatureprovides a clear and compelling case for the importance of emotional intelligence to collegesuccess, academic achievement, retention, personal health, and leadership. The EI ResearchInitiative at Texas A&M University-Kingsville provides an academic structure for continuousand on-going doctoral level research, interdisciplinary collaborative research, anddissemination of research data and results. The Institute for Emotional Intelligence is anannual professional conference and provides a 2-3 day forum for sharing applications anddisseminating quantitative and qualitative research findings.With the interest, encouragement, and support of students, teachers, faculty, andadministrators, a substantive “culture of evidence” is building to support the positivecontributions of emotional intelligence to academic achievement, student retention, andcollege success.Emotional Intelligence - College Success ModelExtensive research resulted in an innovative student development program to explore,identify, understand, learn, and apply the key skills of emotional intelligence in a universitywideacademic program for freshman students. The program emerged from a partnershipbetween University College and the College of Education through a Title V grant-fundedprogram to improve academic success with first-year students. Two professors in education,Drs. Gary Low and Darwin Nelson, assisted in the design of a research-derived model toimplement emotional intelligence skills into college success courses. Their Emotional SkillsAssessment Process was used as the assessment foundation and their Emotional LearningSystem was used for the instruction and learning component for the Javelina EmotionalIntelligence (EI) Program at Texas A&M University-Kingsville.The rationale for the development of the Jvelina EI Program was that emotional intelligence,as a learned ability, is an essential component for enhancing academic, college, and careerCopyright © 2012. Academy of Knowledge Process56

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comsuccess. A structured instructional program was planned and implemented in a corecurriculum foundations class taught in each of the five undergraduate academic colleges andUniversity College.Through an integrative and engaging process, a carefully selected professional team offaculty and administrators, assisted by undergraduate and graduate students, providedstructured class lessons and group facilitated activities for freshman students during the earlypart of the semester. The content of the lessons and the group activities were organizedaround the specific competencies and skills of emotional intelligence. The lessons and groupactivities were coordinated with the faculty who teach the class. The Javelina EI Programconsisted of a seven-step learning process involving EI assessment, structured lessons,peer/student guided group discussions, and homework. The EI-centric curriculum includedTime Management (self management), Drive Strength (goal attainment), and CommitmentEthic (personal responsibility). Guest lecturers, instructors, student facilitators, and studentswere involved in this national award winning student and academic development program. EIcurriculum and lessons were delivered in a seven-step learning process:Step 1: Accurate Self-Knowledge. Students completed the EI Survey Exploring andDeveloping Emotional Intelligence Skills.Step 2: Introduction to the importance of emotional intelligence to academic achievement,college success, and career development. Trained guest presenters conducted the class topresent EI content and engage students in discussions of college success.Step 3: Connecting EI skills assessment to college success. The same guest presenterconducted the class and discussed the student profile of skills from the EI Surveyadministered in step 1. The EI skill of Time Management was a focal point of the class andthe seven-step process.Step 4: Structured group facilitated class with student mentors and instructor on TimeManagement and how to plan and use time for academic success.Step 5: Homework and out-of-class activities related to Time Management.Step 6: Structured group facilitated class with the same student mentors and instructor.Homework assignment and activities were processed and discussed.Step 7: Students organized and turned in an EI packet for academic credit.A Research-Based Education Model of Emotional Intelligence Emotional intelligence is alearned ability to identify, experience, understand, and express human emotions in healthyand productive ways. Emotional experience and expression are unique to each person. Noone else in the world thinks, expresses feelings, chooses behaviors, and acts in the exact sameway. An educational model for developing emotional intelligence must address this uniquehuman condition. The educational model of emotional intelligence at Texas A&MUniversity-Kingsville defines emotional intelligence as a confluence of developed abilities to(1) know and value self, (2) build and maintain a variety of strong, productive, and healthyrelationships, (3) get along and work well with others in achieving positive results, and (4)effectively deal with the pressures and demands of daily life and work (Nelson and Low,1998). This definition provides for a practical, easily understood, skills and competenciesbasedapproach to emotional learning and emotional intelligence. With a skills andcompetencies-based approach, emotional intelligence can be organized, integrated, andtaught in a sequential, step-by-step, learner-centered process. Through long-term study,research, and experience with personal skills and emotional intelligence, the EmotionalLearning System (a systematic emotional skills learning process) was developed. Thislearning process or system consists of five essential, interrelated, sequential steps (Nelson andLow, 1999, 2003).The Emotional Learning System Emotional and experienced-based learning is differentfrom traditional academic content learning. The Emotional Learning System is based on thisdifference. Its five steps are systematic and sequential, yet fluid and interactive–the system isCopyright © 2012. Academy of Knowledge Process57

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comdesigned to ensure a learn reentered development process built on honest, positive selfassessment.Step 1 (Self Assessment: Explore). Requires the student to develop an intentional selfassessment habit: inquiring, discovering, questioning;Step 2 (Self Awareness: Identify). Involves the process of identifying an experience as eithera thought or feeling and leading to reflection not reactivity;Step 3 (Self Knowledge: Understand). Involves ‘insight’ and an understanding that allows astudent to make choices about how to behave;Step 4 (Self Development: Learn). Involves learning various ways to improve behavior; andStep 5 (Self Improvement: Apply and Model). Requires the application and modeling ofemotionally intelligent behavior to achieve academic and career goals.The development of emotional intelligence is an intentional, active, and engaging learningprocess rich with personal meaning.Development is learner-centered and based on the internal frame of reference of the learnerwith the use of a positive assessment process.It is our belief that emotional intelligence is best understood and learned when framedaround specific emotional competencies and skills. The foundation of the emotional learningprocess is a positive assessment of thirteen emotional skills organized around four keycompetencies (Nelson and Low 1999, 2003).Emotional Skills Assessment Process:-Key Emotional Competencies Key Emotional Skills1. Self Management: Career & LifeII. Intrapersonal Development Drive Strength Self Esteem Time Management Stress Management Commitment EthicIII. Interpersonal Development Assertion Healthy Relationships Anger Management Anxiety ManagementIV. Personal Leadership Social Awareness (Comfort) Empathy Decision Making Positive InfluenceCopyright © 2012. Academy of Knowledge Process58

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comThe Emotional Skills Assessment Process of Personal Skills Mapping, Exploring andDeveloping Emotional Intelligence Skills, and The Personal Responsibility Map (NelsonandLow, 1976-2003) has confirmed that self assessed emotional intelligence and personalskills are important to academic achievement, mental health, career effectiveness, andresilience. Healthy emotional development and productivity involve the keycompetencies and skills of emotional intelligence. Learning, developing, and applyingthese skills improve performance and sense of personal well-being. The competenciesand skills of emotional intelligence enable educators to develop a learner-centered skillsbasedcurriculum and personalize the delivery of instruction.The Emotional Intelligence Program is a university-wide effort organized through therequired foundations class taught in five undergraduate colleges. The program is designedto actively engage the student in both academic and self-directed experiential goalorientedactivities. An interdisciplinary team of faculty and administrators, graduatestudents, and student program coordinators work with instructors to provide class lessonsand structured activities early in the semester. The lessons and group activities areorganized from the Emotional Skills Assessment Process.The transitions through education – from school to college to career – are challenging,exciting, and often difficult for students. These transitions are critical to the successfulcompletion of K-16 education and career development. The Emotional IntelligenceProgram is designed to provide the positive and practical model of human emotionalbehavior that students can learn and apply to stay healthy, increase productivity, andimprove personal, academic, and career performance.The Emotional Intelligence Program addresses, to some degree, each of the criticalelements of the student development model with a specific focus on applied institutionalresearch. Institutional research is used to strengthen program development and deliveryfor teaching, learning, and accountability.DISCUSSIONWe need to be vigilant in imparting knowledge to students. Education is a tri- polarprocess where teacher, learner and curriculum are inseparably intertwined. The reputationof a college depends upon the reputation of its teachers. Success of students dependsupon teacher’s guidance and teaching. The most significant factors leading to collegedisaffection, failure, and drop out are social – emotional.When teachers leave teaching, it is much more for reasons related to student behavior,classroom and school climate, and matters of character than it is for anything having todo with technical aspects of teaching and pedagogy (Elias and Arnold 2006). AnEmotionally Intelligent teacher will be a better guide. The greatest asset of educationsystem will then be its Emotionally Intelligent teachers. We need Emotionally Intelligentteachers to activate educational process, so we need Emotionally Intelligent teachereducators to inculcate that quality in teachers.The present generation faces new problems in their life. Teachers need to be equippedwith skills to help them attempt these new and more complex problems. Teacher intoday’s world, just having a bundle of knowledge will be equal to a book that is inactiveand senseless. He must have knowledge along with a set of skills that Emotional59

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comIntelligence provides, such as- empathy, self- control, optimism, stress tolerance, selfregard,flexibility, emotional awareness and so on.Emotional Intelligence is a set of ability essential for the success of an individual, thepurpose of imparting quality education is not possible without inculcation of EmotionalIntelligence and its attributes in the learners. It enables an individual to handle his ownemotions and actions, thereby handling his relationship with others smoothly bycontrolling their emotions.So my research study will impact on academic industry as-As a quality in teacher EI makes them more enable in satisfying their students, as aquality in learners, they will be more exposed to the emotional way with emotionallyeager which will better for their developmentAll facets of management academic institutions will be more psychologically awardedwith happing around them and more polished internally.This study will put impact on pattern of the studding in the institutions.CONCLUSIONEmotionally healthy behaviour is reflected in characteristic ways of thinking, identifying,managing, and expressing feelings, and choosing effective behaviours. Becoming anemotionally intelligent teacher is a journey and process, not an arrival state or end result.Emotionally intelligent teachers are active in their orientation to students, work, and life.They are resilient in response to negative stress and less likely to overwhelm themselveswith pessimism and strong, negative emotions. An emotionally intelligent teacher learnsand applies emotional intelligence skills to improve: Physical and mental health by gaining knowledge/techniques to break the habit ofemotional reactivity (Stress Management); Productivity and personal satisfaction by helping to harmonize their thinking andfeeling minds (Self Esteem and Confidence); Self esteem and confidence by learning specific emotional intelligence skills(Positive Personal Change); Ability to quickly establish and maintain effective interpersonal relationships(Comfort); Ability to understand and accept differences in others and diversity issues(Empathy); Ability to plan, formulate, implement effective problem solving procedures instressful situations (Decision Making); Ability to positively impact, persuade, and influence others (Leadership);Ability to manage time to meet goals and assignments (Time Management);Ability to complete tasks and responsibilities in a timely and dependable manner(Commitment Ethic); andThe Emotional Skills Assessment Process and Emotional Learning System provide anassessment and learning process to help teachers develop a plan of action to learn andapply emotional intelligence skills. Teachers who intentionally develop emotional skillsand model emotionally intelligent behaviour on a daily basis experience more successand satisfaction in their professional career and life.60

International Journal of Contemporary Business StudiesVol: 3, No: 8. August, 2012 ISSN 2156-7506Available online at http://www.akpinsight.webs.comReferences The Collaborative to Advance Social and Emotional Learninghttp://www.casel.org Center for Social & Emotional Education: http://www.csee.net (212) 570-1075 Read about forthcoming conferences, new publications, etc. The Cooperative Learning Center: http://www.coled.umn.edu "Six Seconds" www.6seconds.org Six Seconds is an international not-for-profitorganization supporting the development of emotional intelligence in business,education, and the community. The organization publishes assessment anddevelopment tools and trains and supports professionals to make a positivedifference in all sectors of society. Six Seconds, The Emotional IntelligenceNetwork T: 831 763 0366 • E: josh@6seconds.org Resources: www.eq.org There are many many organizations listed onwww.EQ.orgThe Center for Mental Health in Schools: http://smhp.psych.ucla.eduBar-On, Reuven, & Parker, James D.A. (2000). The handbook of emotional intelligence. NewYork: Jossey-Bass.Blatner, A. (1995). The place of drama in education–A child psychiatrist's viewpoint. YouthTheatre Journal.Cohen, Jonathan. (Ed.) (1999). Educating minds and hearts: Social Emotional Learning and thepassage into adolescence. New York: Teachers College Press.www.teacherscollegepress.comCohen, J. (2001). Social emotional education: core concepts and practices. In J. Cohen (Ed.).New York: Teachers College Press.Cooper, Robert; & Sawaf, Ayman. (1996). Executive EQ: Emotional intelligence in leadershipand organizations. New York: Grosset/Putnam.Elias, M.; Zins, J. E., Weissberg, R. P., Frey, K.S., Greenberg, M.T., Haynes, N. M., Kessler,R., Schwab-Stone, M. E., & Shriver, T. P. (Eds.). (1997). Promoting Social andEmotional Learning: A guide for educators. Alexandria, VA: Association forSupervision and Curriculum Development (ASCD). around $22.00. The first chapteris available on the we http://www.ascd.org. E-Mail Member@ascd.orgGoleman, Daniel. (1995). Emotional intelligence. New York: Bantam.Goleman, Daniel. (1998). Working with emotional intelligence. New York: Bantam/Doubleday/DellNovick, Bernard; Kress, Jeff; & Elias, Maurice. (2002). Building Learning Communities withCharacter: How to Integrate Academic, Social, and Emotional Learning. On theASCD web page http://www.ascd.org/readingroom/books/2002novick_toc.htmlPrescott, K. (Ed.). (1995). Teaching pro-social behavior to adolescents: A directory of processesand programs used in Australian schools. Torrens Park: Australian Guidance andCounseling Association. .Salovey, Peter, & Sluyter, D. (Eds.) (1997). Emotional development and emotionalintelligence: Implications for educators. New York: Basic Books.Salovey, P., Bedell, B. T., Detweiler, J.B., & Mayer, J.D. (1999). Coping intelligently. In C.R.Snyder (Ed.), Coping: The psychology of what works (pp. 141-164). New York:Oxford University Press.Topping, K.J., & Bremner, W.G. (1998). Promoting social competence: Practice and resourcesguide. Edinburgh: Scottish Office Education and Industry Department.61