Creating and Measuring Shareholder Value:

Abstract

To measure shareholder value creation has been the issue of discussion all around the world. It has become crucial since the companies were increasingly committing to creating shareholder value. Old traditional measures are criticised for having low correlation with shareholder value creation. Therefore, new valuation methods are needed to measure the shareholder value creation. However, the changing process from the traditional methods to the new ones is not easily welcomed. How then shareholder value creation is measured nowadays is of crucial importance. In order to address this issue, the thesis presents in a general way how shareholder value is created as a background to the valuation methods being used for shareholder value creation measurement. The empirical part of the study showed that although the companies in this study have implemented many ways to create shareholder value, little effort is being made to measure it since the majority of them are still using the traditional accounting measures. The reasons for this may be conservatism and lack of pressure from both the stock market and shareholders. Having noticed this we then recommended the companies to use `value based methods' when measuring shareholder value creation since they are more reliable.