The Impact Of EVA Performance Evaluation On State-owned Capital Allocation Efficiency

The State-owned enterprise as the carrier of state-owned economy is the backbone of China’s economy for a long time. Its capital allocation efficiency directly affects the enterprise’s competitiveness and value, which is an important way to ensure the preservation and appreciation of State-owned capital, but also to improve the control of state-owned economy and consolidate the dominant position of public ownership economy. For a long time, the State-owned enterprise’s performance is far better than the non-State-owned enterprise and its capital allocation efficiency is naturally lower than the non-State-owned enterprise, which due to the distortions of state-owned business objectives and the lack of management incentive constraint mechanism. In this regard, the State-owned Assets Supervision Administration Commission began the comprehensive implementation of EVA performance evaluation to Central enterprises. The EVA performance evaluation is not only the assessment tools to guide and carry out a comprehensive value management, but also the baton of improving operational efficiency. SASAC developed a "core value increase on economic strengthening of the central enterprise value management guidance," in 2014. It stressed the enterprises should according to the characteristics of the state capital to allocate resources rationally and to improve the efficiency. This indicates that EVA has become important means to realize the value of State-owned capital create. Over the years, whether the EVA evaluation achieved the intended effect?In order to account for the proposition, this paper based on the peculiar background of the reform of State-owned assets at the present stage in China, at the moment of SASAC implementing EVA performance evaluation to Central enterprises, according to principal-agent theory, contract theory, theory of value creation and performance evaluation, By investigating the 2007-2013 State-owned industrial enterprises and private industry-by-industry statistics, using statistical sampling methods of empirical research, preliminary tests the difference between the State-owned enterprise’s and the non-State-owned enterprise’s capital allocation efficiency and the effect of EVA on this system, to boosting the promotional mechanism about the effect of EVA performance evaluation on state-owned capital allocation.This paper follows the research idea of "questions - literature review -theoretical analysis - model - empirical analysis--suggestions". On the basis of research questions, firstly, using document analysis, this paper discusses research progress both "EVA performance evaluation " and "Factors affecting efficiency of capital allocation". Secondly, via theoretical deduction, clarify the implementation of EVA on narrow State-owned enterprises and non-State-owned enterprises of capital allocation efficiency gap. Thirdly, based on sample of State-owned industrial enterprises and private industry-by-industry of 2007-2013, using empirical model to test the following hypothesis:(1)Whether the capital allocation efficiency of state-owned enterprises is significantly lower than that of non-state-owned enterprises; (2) With the implementation of EVA performance evaluation, whether the gap of capital allocation efficiency between state-owned enterprises and non-state-owned enterprises is more significant gradually reduced; (3) In competitive industry, whether EVA evaluation is more pronounced to narrow the gap of capital allocation efficiency between state-owned and non-state-owned enterprises. In the end, this paper puts forward relevant policy suggestions according to inductive conclusions.This study found that, after controlling for other relevant variables, the capital allocation efficiency of State-owned enterprises as a whole is significantly weaker than that of non-State-owned enterprises. However, with the implementation of EVA performance evaluation and the improvement of SOEs environment, the gap between capital allocation efficiency is narrowing. In addition, further testing also found that compared with the low degree of competition in the industry, in a higher degree of competition in the industry, EVA performance evaluation is more significant to reduce the efficiency of capital allocation differences.The main innovation of this paper has the following main points:(1) From a theoretical point of view, by combining the theories of the added value of economic theory, performance evaluation theory and capital efficiency theory, this paper has studied the role of EVA performance evaluation to enhance the capital allocation efficiency. So it enriches and develops the relevant research about economic consequences of the EVA performance evaluation and efficiency of capital allocation factors, and provides important and useful new perspectives and evidence for theories; (2) From the practical point of view, for the first time on the show in the empirical promote EVA performance evaluation is an important way to improve the efficiency of capital allocation, as well as a way to promote the sustainable development of China’s economy and to completed a new aspect of State-owned enterprises. The conclusions not only provide empirical evidence for the long-standing debate about the consequences of the economic value added, but also provide the basis for the implementation of the policies; (3) At the micro level, the conclusions can help the national macro-economic fall in practice and provide a useful direction for economic development.Deficiencies of this study is reflected in:(1) It is only six years after the enterprises implemented EVA, therefore the real effect is not yet very highlights, which may affects the robustness of the results to some extent; (2) Sample selection bias. The implementation of EVA primarily for the central enterprises, although some local state-owned enterprises followed, but not been able to cover all state-owned enterprises. However limited to the central enterprise availability of industry statistics, we can only use all state-owned enterprises industry statistics instead of all central enterprises. Therefore, the conclusions may have some bias. With the deepening of EVA and network data are maturing, we will strive to solve the above problems in future studies.