The Effect Of EVA Assessment On State-Owned Enterprises' Earning Quality

The socialist public-owned economy occupies the main position in our national economy,in which the state-owned enterprise(SOE)is the most important economic entity and plays an extremely significant role in the economic development of our country.However for a long period of time,the principal-agent chain is too long,which leads to the owner absence of state property and high agent costs.In addition,the lack of performance assessment system and the existence of insider control result in many other problems for state-owned enterprise,such as aimless expansion,overinvestment,insufficient value creation and low international competitiveness.In order to fulfill the responsibility as the investor of state-owned enterprise,ensure the value preservation and increment of state-owned property,and lead the state-owned enterprise to achieve value management and scientific sustainable development,the SASAC(State-owned Assets Supervision and Administration Commission)started to use EVA as an index to evaluate the performance of supervisors of state-owned key enterprise since 2010.So far,it has been 2 assessment periods(6 years)since 2010 when SASAC brought EVA into the performance assessment system,to check the effect of EVA becomes an urgent task at present.One of the symbols of success is that the state-owned enterprise can create more value than before,but what is more important is that the value created is sustainable and of high quality.The earning management behavior of the supervisor in order to reach the EVA standard is obviously against the original intention of the implementation of EVA assessment.Therefore,this article investigates the influence of EVA to state-owned enterprise from the perspective of earning quality,attempting to find out the potential problems in the practical application of EVA assessment system.On the basis of samples which consist of 131 state-owned key enterprises listed on Shanghai&Shenzhen stock exchanges and their data during period 2007-2015,this paper investigates the relations between EVA assessment and state-owned key enterprises'earning quality.The result shows that owing to the fact EVA can reflect company's real ability to create value as well as supervisor's levels of management and devotion,the implementation of EVA assessment does indeed promote the earning quality of state-owned enterprises,which proves the validity of the strategy to bring EVA into the assessment system and also suggests that we should persist in the EVA assessment system,enlarge the range of EVA assessment,raise the proportion of EVA in the assessment system and mine the value of EVA in enterprise management.Another conclusion is that due to the unreasonable design of the EVA assessment system,over high or over low EVA can make the incentive system invalid,which will induce the self-interested behavior of supervisor and reduce the earning quality of state-owned enterprise.That means the EVA assessment system needs to be improved.Based on the conclusions above and the application of EVA in assessment system at home and abroad,this paper puts forward some suggestions to maximize the function of EVA in assessment.Initially,we should deepen the understanding of EVA and strengthen the role of EVA in the enterprise value management,for EVA assessment can be effective only in combination with management.Furthermore,the EVA assessment system needs to be improved.On the one hand,differentiated assessment methods are required for different types of enterprises in different industries.On the other hand,the scientificalness and rationality of the assessment system can be also achieved by means of the optimization of EVA calculation method and the perfection of salary incentive system.Finally,we should strengthen the supervision and improve the transparency during the application of EVA assessment in order to avoid formalism.