The Influence Of Growth On Company Value Creation And Shareholder Value Creation (Case Study of Company Listed in Jakarta Stock Exchange 2002-2004)

Abstract

Dini Angwantika (2006): The Influence of Growth on Company Value Creation and Shareholder Value Creation. (Case Study of Companies Listed in Jakarta Stock Exchange 2002-2004).

There are two kinds of growth: good growth, which magnifies value creation; and bad growth, which magnifies value destruction. In order for a company to attain its long­ term goals, it should define the future condition of the company itself, by identifying what kind of growth it will have to face, what influences growth has on value creation, and how deep the kind of growth influencing that value creation is. All of the above elements play a crucial role in strategy development. Thus, it is very important that this area is studied further, so that businesses have a better understanding of the influence of growth on company value creation and shareholder value creation. This research was conducted with the aim to empirically prove the influence of growth on value creation. Because of many limitations, growth studied in our research is limited to sustainable growth, growth determination, and financial growth, while company value creation is represented by Economic Value Added (EVA) and shareholder value creation represented by Shareholder Value Added (SVA). We chose to limit growth to the three areas mentioned above in response to the fact that most companies consider growth as value drivers from a financial perspective, further, we chose EVA and SVA to represents value creation due to the fact that both are the latest proxy in relevance with value measurement. Our results shows that only growth determination has significant influence on EVA, and price per share has significant influence on SVA, which proves that growth should be seen as something holistic. Not only something that is always positive and profitable (in terms of financial). Rather, growth is like a coin; it has two sides; on the one side it can lead to value creation, but on the other side, it can lead to value destruction.