Research On The EVA Evaluation Index

After China joined WTO, the liquidity of capital increase continually with the development of capital market .The investors are all eager to get higher return on capital. which call for corporation (especially for those come into the market)to manage in a high standard. Currently, how to deal with the puzzle with the relation of client and attorney has become the key question in the innovation of National Corporation, and the consistency with reward inspiriting system of operator and benefit become the most important issue. In order to find an effective institution to coordinate the incentive and constraint mechanism,the first thing we should do is to build an effective performance evaluation model for evaluating the manager's performance Objectively and scientifically . The EVA system can provide effective method in solving the above questions.The paper explain the background of EVA firstly,then introduce theory basis of EVA and review the previous domestic and abroad study on EVA ,and also point out the significance of EVA applying in our country .The follow section of the paper begins with the analysis of traditional performance evaluation. The conclusion is that the enterprise value could not be depicted by traditional evaluation systems vividly such as ROE and EPS. The main defects lay on two aspects. One is that only the debt capital is directly considered to the gain-or-loss of that year.However,the equity capital is usually overlooked.So the Judgment of enterprise value is imprecise because of the inadequate cost calculation.The other aspect is that traditional performance evaluation system can cause the manager to take short-term action. On the base, the paper expatiates the economic essence of EVA, and also discusses how to use EVA theory into our country.At last,the paper gives an example of applying EVA performance system., and summarize the merit and limitation of EVA. The paper's goal is to adjust EVA to the need of our domestic corporation, and hope to give a valuable reference for the innovation of Chinese corporation.