The Moderating Effect Of Eva Performance Evaluation To The Relationship Between Internal Cash Flow And Non-efficiency Investment

After the EVA concept was first introduced to China in 2001, it was widely concerned by the theory circle and the practice circle. In 2010, the SASAC announced that the central enterprises would carry out the EVA performance appraisal, which pushed the enthusiasm to the climax.EVA performance evaluation in the full implementation of the central enterprises is a great innovation in the reform of China’s history’s performance system.It mostly focuses on: in the EVA index,the cost of capital not only includes the cost of debt but also the cost of equity capital, which makes the enterprise’s internal cash flow equal to external funds raised. They both have the capital cost instead of no cost with. So the operators of the central enterprises are more careful about the use of surplus of internal cash flow to a certain extent. And thus it effectively inhibits the over investment behavior cased by internal cash flow surplus. However, according to the theoretical analysis, the implementation of EVA performance evaluation may also have the overcorrect phenomenon, making the operators give up good investment opportunities in the situation of internal cash flow shortage, and exacerbating the problem of insufficient investment caused by internal cash flow shortage. Therefore, how the EVA performance assessment affects the sensitivity of the two, the article will make a comprehensive discussion.This paper, on the basis of a comprehensive exposition of the related theory, analyses the relationship between internal cash flow and investment of non efficiency and takes the influence mechanism of the EVA performance evaluation on the relationship between the two into consideration. And it also will incorporate performance evaluation of the effects of EVA into the analysis frame work. At the same time, I choose the central enterprises holding listing corporation empirical data from 2006 to 2013, discussing the EVA performance appraisal as a system of supervision mechanism in the two aspects of excessive and insufficient situations, and the role it plays in the governance of SOEs internal cash flow and the investment sensitivity of no efficiency. So we can come to the conclusions:(1)If the internal cash flow surplus are more, the excessive investments are more serious; The implementation of EVA performance appraisal can weaken the internal cash flow’s effect on over investment, and thus inhibit the internal cash flow surplus behavious caused by over investment.(2)If the Internal cash flow gap is bigger, the lack of investment is more serious; The implementation of EVA performance evaluation will promote the effect of internal cash flow shortage on the lack of investment, and further intensifies the internal investment shortage problem caused by a shortage of cash flow.This paper, based on the background of EVA performance appraisal, explores the impact of the implementation of the system on the relationship between the central enterprises’ internal cash flow and investment of non efficiency, which not only enriches the internal cash flow and investment of non efficiency, but also expands the perspective of application effect of EVA in China. According to the research conclusion, this paper gives the corresponding suggestions to the SASAC and the central enterprises from two aspects. And thus further providing a new way of thinking for improving the performance appraisal system and promoting EVA for our country.