The Performance Evaluation Of Enterprise Group Finance Companies Based On DEA Research

Along with the reform and opening up, accompanied by large enterprise groups’ policyreform, finance company of enterprise group arises at the historic moment, to improve itsservice efficiency and strengthen centralized management of funds, as non-bank financialinstitutions, to provide financial management services for member units of enterprise group.First of all, this article analyses the definition and function of the finance company.Finance company, as part of the enterprise group, different from general subsidiary company,is a result of combination of industry and finance, functionally working not only as the groupsettlement center, and also investment center, financing center and credit center. Attaching tothe enterprise group, the basic function of financial company is to provide service toenterprise group, in a sense, playing a role of internal capital markets. However, to makeprofit as a special financial institutions should be a second part for finance company tofocus,after providing centralized management and improving service efficiency for theenterprise group as basic functions. Finance company mainly provide accommodation offunds for enterprise group financing, to reduce the cost of financing, increasing the utilizationrate of funds.Secondly,this article analyzes the existing evaluation index system. The existingevaluation index system of finance companies does not take into account the primary functionof a financial company, which is to focus on internal financing for member units of enterprisegroup, not in order to get high profit as a main goal. Different with general financialinstitutions, the current evaluation system doesn’t have an certain evaluation index accordingto the special function of finance company; Also, the financial evaluation system is not soundfor only emphasizing the financial evaluation indicators which focus on short-term interests,and ignoring the importance of non-financial evaluation indicators which reflect long-terminterest objectives. According to performance research on different functions of financialcompany, this article is to build a more comprehensive index system including both financialindicators and non-financial indicators, so as to make the evaluation system more perfect,being able to not only evaluate the financial performance of the company itself but also reflectfinancial contribution to the whole enterprise group. Research on performance evaluation offinance company can provide theoretical reference for scholars, managers and governmentdepartments to get more comprehensive understanding of the performance of the finance company. To evaluate the performance of finance company as an important part of enterprisegroup, can better measure its internal contribution as the center of the enterprise group fundmanagement and its contribution in developing external investment business as a bridge withexternal financing market and can also support a better development of the finance company.The article is based on Data Envelopment Analysis (DEA), which is different from thetraditional performance evaluation indicators.DEA focuses on the relative effectiveness ofmultiple input and multiple output, both using the financial data analysis, and non financialdata analysis, providing a more comprehensive index evaluation system to evaluateperformance of enterprise group finance companies. By evaluating performance of financecompany, this article gets a conclusion that performance improvement can be obviouslyexpressed by efficiency improvement. The overall efficiency level of the existing financecompany is not high enough, so unnecessary costs and staff redundancy should beappropriately reduced, to avoid blind expansion and waste, at the same time, internalmanagement within the finance company should be strengthened. At the same time, given fullplay to its function as part of enterprise group, finance company will improve its performance,in order to improve the performance of enterprise group.