Assessing the Role of Financial Metrics and Firm Type in Economic Value Creation: An Empirical Study of Indian and Multinational Manufacturing Firms

The study investigates the association between financial performance measures and economic value added between the Indian and multinationals manufacturing firms in India. Using a strong panel data framework from 2016 through 2024, it combines role of core financial ratios — namely, ROE, ROA, ROCE, EPS and Debt to Equity — with Economic Value Added (EVA) and Market Capitalization to derive long term value creation. The research applies fixed effects, random effects, and time-fixed effects models to account for firm-specific heterogeneity and temporal dynamics. However, value creation drivers differ dramatically between Indian and MNC firms as indicated by the interaction variable of firm type. Results emphasise that capital efficiency (ROCE) and financial structure (D/E) are the two most important factors affecting EVA, while MNCs show relatively higher value robustness. A composite financial health index is developed in the study while log-linear regression is used to study the drivers of firm valuation. The results have meaningful implications for corporate strategy, investor decisions, and policymaking in emerging markets.