Research On EVA’s Validity For Evaluating Performance Of Central Enterprises

In the late20th century, China began to draw Economic Value Added(short for EVA)to Performance Evaluation of Central Enterprise,The financial philosophy of EVA gradually get our attention. On January1,2010, State-owned Assets Supervision and Administration Commission issued Order No.22:"Interim Measures of central enterprises responsible person for the operational performance assessment", The annual performance appraisal indicators include basic indicators and disaggregated indicators. It added economic value added indicators on the basis of the total profit, and EVA became the core indicators of the annual performance evaluation of the responsible person instead of ROE, the assessment weights up to40%.The financial goals changed into maximizing shareholder value by profit maximization, Enterprise management changed into value management by profit management, thus it leads to a series of subversive change. The research choose the central enterprises as the object, combining normative and empirical methods to verify that Does the central enterprises drawing EVA into the performance evaluation really effective? Can the performance of central enterprises improve substantially? Is EVA superior to the traditional performance evaluation? And whether EVA and traditional performance indicators are able to combine?The research ideas:Firstly, the introduction, It introduces research backgroud and research meaning of this article, the contents and research methods.Secondly, the first chapter introduces Literature Review.Chapter2introduces theoretical analysis and hypothesis, including Basic theory of Enterprise Performance Evaluation which based on EVA, performance evaluation of state-owned enterprises basic theoretical and Theoretical analysis and hypothesis.Chapter3introduces Empirical Analysis, including Data sources and sample selection, Variable Selection and Description, Reserch design, Descriptive statistics, Correlation test, Empirical Analysis Results and Analysis and Sensitive Test.Chapter4introduces Conclusions and Policy Recommendations.At last, From the empirical analysis, we concluded that EVA helps to enchance central enterprise performance substantially, and is related to Market Value Added(MVA) at the0.01level, the correlation coefficient was0.654; It explains42.7%of MVA. Net profit NI has particularly strong explanatory power of the MVA, it achieved89.7%, R2increased a little when regression analysis added EVA, but only1%, It proves that EVA does not reflect a good effectiveness. This is also reflected that although central enterprises realized that the cost of equity capital, but the financial management objectives is still maximizing shareholder wealth.