Value-based performance assessment using smart financial metrics, EVA and MVA an emperical analysis with reference to Reliance Insurance Limited

The concept of capital structure is extremely important because it can influence not only the return a company earns for its shareholders, but whether or not a firm survives in a recession. Maximizing shareholder's wealth has become the new corporate paradigm. The thrust area for today's management is to find means to create value for the owners. Many traditional models are present which may not measure the actual value created for its share holders. Decision-making about the capital structure meaning company's finance, like other managers’ decisions has an impact on the company's value. Therefore, determining an optimal capital structure in order to select financial sources is of crucial importance. To do so, the managers must be aware of the effects of influential variables on the capital structure. In order to assess the performance of business, different criteria have been presented, among which are the relationships of the value-based performance assessment. The present study aims at showing the correlation between the capital structure and the variables of the value-based performance assessment. Thus, it is necessary for the usage of modern tool EVA to determine whether the wealth had been made use of or been destroyed. The firms can even plan optimum capital structure to increase their value where, Maximizing shareholders value has become the new corporate paradigm in recent years. The Corporates, which gave the lowest preference to shareholders curiosity, are now bestowing the utmost preference to it. Shareholder's wealth is measured in terms of returns they receive on their investment. 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. The market value of stocks depends upon number of factors ranging from company specific to market specific. Financial information is used by various stakeholders to assess firm's current performance and to forecast the future as well. The study aims in the assessment using the smart financial metrics Economic Value-Added (EVA) and Market Value-Added (MVA).