Study On The Decision Models Of Value Based Management And Their Applications

The conventional management methods, which are from the classic management theories and based on efficiency, appear hard to meet the modern requirements. These means always ignore what the management is based on and do not focus on creation. The assumptions for business success also is running away from the realities, which makes the incentive schemes used inappropriately, and even leads to the confusion of purpose and approaches. Furthermore, the alignment of all parts in corporations is lacked. That is why VBM becomes popular, which could play a key role in decision making, corporate governance, control, performance measurement, Mergers and Acquisitions. VBM focus on value creation, and contribute to value increase. Consistently based on value both in corporate governance and financial management, seeking how to manage for value creation, linking the strategic goals to all factors in maximizing shareholder value, this is how VBM works.This paper discusses several mainstream value models in VBM system, and makes some demonstrations and analysis of some of them in the real stock market in China. Advice for the introduction and development of VBM in China is also given.There are four chapters: Chapter 1 articulates the theory of VBM, including the history and development, definitions and processes, then advantages and drawbacks. In Chapter 2, several strategy models, FCF, EVA, MVA, CFROI and CVA, are selected, and the principles and methods for all of the models are discussed. Chapter 3 involves with the demonstrations and analysis of the models in stock market. And from the results, applications of VBM in economical environment of China are analyzed. The significance of VBM to modern management is addressed in Chapter 4, in which the applications of VBM in corporate finance revolution and modern management change, and implementation of VBM in China are both discussed.