Value Creation And Stock Prices:An Empirical Analysis Across Different Financial Markets

Literature debated for years about which objectives should guide managers in running their companies. Several alternatives have been proposed. At the end of the day, however, what managers should really care about is Value Creation. It is very likely that when a company creates value, all the actors involved in the firm activity will be better off.Of all the metrics and models proposed by scholars, the framework proposed by two authors of The McKinsey Quarterly seems to be the best one. Basically, companies will produce value when their Returns on Invested Capital (ROIC) will be higher than the difference between their Weighted Average Cost of Capital (WACC) and the Growth Rate. Otherwise, they will be destroying value.The aim of this study is to verify which percentage of stock price movements has been explained by concrete value creation in2005-2011period. An analysis of the correlation between price movements and McKinsey index will be performed over four different financial Markets: New York Stock Exchange, Milan Stock Exchange, Hong Kong Stock Exchange and National Stock Exchange of India.Sampling companies from four different financial markets, it will be highlighted whether or not the country influences the relationship between price movements and value creation. Also, the different efficiency of the model in explaining short-term and long-term movements will be stressed up.