Study On The Performance Evaluation Of State-owned Enterprises Based On EVA

Since reform and opening-up, China’s economy is developing very quickly. Through the reform of joint-stock system, the state-owned enterprisescontinue improving operational efficiency and management level. At the meantime, the operational idea of the state-owned enterprises is changing. The investors not only focus on the traditional performance indicators, such as revenue and profit, they pay more attention to evaluating if the enterprise create value. So how to evaluate the enterprise’s ability of creating value is the basic problem in the developing process of stated-owned company.Although the traditional performance indicators which are profit-oriented have many advantages, such as easy to get and understand, they have fatal shortcomings that ignore the cost of equity capital. The result is that this kind of performance indicators can not evaluate the real achievements that the company got. So the efficiency of the equity capital is very low in state-owned. The Economic Value Added which is short for EVA, are indicators that take the cost of equity capital into account when evaluating aenterprise. When take this factor into account, the managers have to pay much more attention to the cost of equity capital. And if managers focus on the cost of equity capital, they will invest more on the main business of the company. Managers will also reconstruct the enterpriseto adapt to this change in evaluating company. Another benefit is that EVA can bring the interest of investors and managers together. This is very important to a company’s continuing development. The State Property Management Committee(SPMC) has officially put the EVA into the state-owned enterprise performance evaluation system since2010. The EVA can guide the state-owned enterprise build correct operation idea, appropriate organization construction and performance evaluate system to gain the value of state-owned asset. So, how to handle the EVA is a major subject for the state-owned enterprise.This article firstly reviewed the research achievements that the predecessors had made about the EVA evaluation system. Based on the basic theory of EVA, I made a comprehensive analysis on the present situation of state-owned performanceevaluation system and macro economical environment in China. I find that we will benefit a lot if we integrate EVA into our state-owned performance evaluation system. In this article, I discussed how to compute EVA in practice and handle EVA in practice. Through this case, I point out the problems when we apply EVA in our state-owned enterprise. In the last part of this article, I put forward some suggestions on how to solve those problems.This article hold the opinion that EVA is better than the indicators based on profit on evaluating the enterprise’s ability of creating value. EVA can reflect the enterprise’s ability of creating value objectively, which is very important to a enterprise continuing development. But because of the imperfection of China’s capital market and enterprise construction, there are many problems when we apply EVA performance evaluation system. So, we should establish a kind of EVA performance system based on China state-owned enterprises’ condition to improve state-owned enterprises’ development quality.