A Research On The Relativity Of EVA With Share Price Effect

EVA is a system of financial index created by Stern Stewart Corporation for the aim of maximizing the shareholder wealth. EVA embodies the shareholder's interest by assuring the value of a company only while its capital earning exceeds the capital cost invested.EVA, as the core of the achievement evaluation system bases on traditional accounting profit system but superior to it. The most distinguished difference of them lies in the dealing of"capital cost", i.e. the traditional accounting profit only calculates the liability cost, while EVA comprehensively considers total capital costs—costs of liability and equity, honestly reflecting the firm's achivements. This thesis, starting on the analysis of Sino-Western classic financial achievement evaluation theories, points out that the key of the virtual value evaluation of a firm is to establish a system of proper performance evaluation index, and by comparing the EVA with traditional index, proves the superiority of EVA, then, gives a detailed interpretation for EVA's application on the value assessment. In the following empirical study,the writer collects 744 company financial data samples in Shengzheng and Shanghai Stock markets from 2000 to 2006, which includes the share prices on the date of balance sheet and the cash dividends in related years, then calculates out the equity cost and the EVA by the use of the pricing model of capital assets, and introduce the relative index of EPA ( EVA\NA). Regression analysis between EVA and EVA with the share prices shows that the two index both strongly links with the share prices, comparatively, EPA's relativity with the share price is better off. Although at present the introduction of EVA to China's stock market for investment analysis system faces a series of unfavorable facts, such as the unsatisfactory state of supervision system and information releasing, the public company's governance , and the market efficiency and maturity, the introduction of EVA, form the analysis result, will greatly normalize the behaviors of the public companies and promote the maturity of China's capital market. With the growth of the domestic financial market, an extensive application of EVA is predicted with its own improvements.