SHAREHOLDERS' VALUE OF PUBLIC CORPORATIONS IN BAHRAIN

Abstract

Abstract: The purpose of the present study is to measure the shareholders' value of public corporations listed in Bahrain Stock Exchange, mainly, by determining if those corporations create value or not. It is also done by determining the value drives in order to obtain a good model for calculating the economic value added (EVA) of shareholders' value. The sample consists of 15 corporations (seven from the service sector, three from the industrial sector, three from the hospitality sector and two from the investment corporations) over the period of seven years, from 1990 to 1996. The selection of companies is based on the basis of their listing in Bahrain Stock Exchange and if their trading records are available for at least seven years. The methodology relies on two main approaches: the pilot study and the main study. The model applied in this study is the economic value added (EVA) which is designed to measure the shareholders' value, and multiple regression is applied in order to determine the value drives. The general conclusions reached are as follows: service corporations sector is the only sector, during the study period, that created value to their shareholders. The industrial and hospitality sectors are not in a stable status: in 1990, 1994 and 1995 they destroyed value while in 1991, 1992 and 1993 they created value. The Investment companies, during the study period, destroyed value. In addition, the study indicates that EVA can be explained as a function of Return on Equity (ROE) or Return on Assets (ROA).