Assessment of firm's market value through financial variables - A case of UK Banking industry

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ACKNOWLEDGEMENT

No words can express my appreciation and gratitude to my research advisor _______ through the course of this research, Professor _____has taught me numerous values that extend well beyond the realm of _________ (Your Subject Name). His emphasis on dedication to work and his valuable and practical insights of life are some of the major highlights of my education at The University _________.

DECLARATION

I [type your full first names and surname here], declare that the contents of this dissertation/thesis represent my own unaided work, and that the dissertation/thesis has not previously been submitted for the academic examination towards any qualification. Furthermore, it represents my own opinions and not necessarily those of the University.

Signed __________________ Date _________________

ABSTRACT

Valuation of firms has always been a top priority of participants in capital markets, primarily those interested in how financial performance is linked to stock returns. Traditional performance benchmarks, i.e., return on equity (ROE) and return on assets (ROA), do not consider the cost of invested capital (equity and debt) in order to generate the profits made by a company. This dissertation had aimed to analyze the impact of selected financial variables on the market value of banks in UK and tried to determine which financial variable could be used to effectively determine the market value of UK banks. For this purpose, the research had used both primary and secondary data and applied both qualitative and quantitative research designs for the purpose of analysis. The results of this dissertation has shown that cash flows and price to earnings have been making a significant impact on the market value of firms in UK; however, only the financial variable of cash flows could be used to make a statistically significant assessment of market value of UK banks. The financial variables of price to earnings ratio, net profit, and interest margin ratio had been found to make a significant impact on the market value of UK banks.

TABLE OF CONTENTS

ACKNOWLEDGEMENTII

DECLARATIONIII

ABSTRACTIV

LIST OF TABLESIX

LIST OF FIGURESX

CHAPTER 1: INTRODUCTION1

1.1 Introduction1

1.2 Problem statement2

1.3 Purpose statement2

1.4 Aims and objectives of the study2

1.5 Research questions2

1.6 Variables used3

1.7 Hypothesis3

1.7.1 Hypothesis 13

1.7.2 Hypothesis 24

1.7.3 Hypothesis 34

1.7.4 Hypothesis 44

1.8 Rationale of the study4

1.9 An overview of the UK banking industry5

1.10 Outlay of the study6

CHAPTER 2: LITERATURE REVIEW8

2.1 Financial variables8

2.2 The theory of market valuation in the new economy10

2.3 Firm's intrinsic value is driving its market value12

2.4 Assessing market value of a firm through different financial variables14

2.4.1 Price-earnings ratio14

2.4.2 Cash flow model14

2.5 Firm value in a world of certainty15

2.6 Firm value as a function of dividends17

CHAPTER 3: METHODOLOGY20

3.1 Introduction20

3.2 Overview of qualitative and quantitative research approaches21

3.3 Research approach used in this study22

3.3.1 Justification of using mixed method to research22

3.4 Research tools utilized22

3.4.2 Secondary data search23

3.4.4 Unstructured interviews23

3.5 Population and sampling23

3.5.1 Population24

3.5.2 Sampling frame24

3.5.3 Sampling procedure24

3.5.4 Sample25

3.6 Application of statistical tools25

3.6.1 Correlation analysis25

3.6.2 Regression analysis25

3.7 Summary26

CHAPTER 4 DISCUSSION AND ANALYSIS27

4.1 Firm market value and financial variables27

4.2 Accounting information and firm market ...