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

In the past forty years China has seen impressive economic growths and become the second largest economy in the world,in which state-owned enterprises(SOE)played a crucial part.Meanwhile,the business philosophy of SOEs has been changing in the process.In 2010,SASAC introduced EVA as a key element in the new appraisal system of the SOEs,which suggests that the investors not only pay attention to traditional indicators such as turnovers and profits,they also start to find value creation process prominent.Since profit indicators have been prevailing worldwide for decades,the advantages of them should not be undermined,e.g.obtainable and understandable.Nevertheless,we also find significant flaws in these factors as they neglected the costs of equity capital which can cause inaccuracy in the reflection of the performance and value creation ability of the SOEs.The profit orientation of SOEs may lead to unrestrained pursuit of expansions and inefficiency in capital operations.Many seemingly profitable enterprises can actually endanger the wealth of their investors.The philosophy of EVA appraisal is that equity capitals also have costs.This method amends the flaws of traditional profit-oriented indicators thus enables true and accurate reflections of value creation of enterprises.It has since become the most significant appraisal indicator in the western world.In 2010,the SASAC issued The interim guidelines on the assessment of SOE managers,which introduces EVA as appraisal method in SOEs.The guidelines clarified the formula,accounting adjustments and motivation in the EVA method,implementing an EVA centered framework that allowed SOEs to evaluate their performances.The guidelines are of great importance regarding the application of EVA in SOEs.In the first,this essay introduces the theoretical basis of EVA;Secondly it provides a brief review and analysis of the current application of EVA in SOEs based on the survey in this regard;Thirdly the essay performs a study of EVA performance system in enterprise N;The final part of this essay designs a value management system for enterprise N and all SOEs based on EVA theories.This essay holds the position that EVA appraisal system is more effective than the traditional ones and a comprehensive application of EVA management system can assist the SOEs in the value creation process.And a localized EVA appraisal and management system should be cultivated in SOEs,which would enormously benefit the sustainable development of SOEs.