Exploring And Examining The Application Of EVA Management Mode In The Credit Guarantee Enterprises

Traditional performance evaluation indicators, such as, Net Profit, Earnings per Share, have some limitations and cannot reflect real shareholders' returns. EVA, a new type of performance measurement indicator adopting by many Chinese enterprises now, has taken into account enterprises' cost of capital, value creating abilities and integrated performance measurement with reward motivation. However, the applications of EVA in domestic enterprises, especially in the field of credit guarantee enterprises, still need further examination and improvement.From a practical view, the article reveals problems that private enterprises would have in the application of EVA system based on intensive analysis and discussion of EVA performance measurement and reward motivation systems adopted by ABC Credit Guarantee Limited. Proposals for improvement are also examined in this article. The research would benefit those domestic private enterprises that adopt EVA system.This article has five chapters. The first chapter examines source of EVA theory, including company value theory, surplus value theory, principal- agency theory, and the definition, calculation and meaning of EVA. Also, it summarizes the EVA system of Sterm Sterward & Co. The second chapter analyses strengths and weaknesses of current performance measurement systems adopted by domestic enterprises, focusing on the evaluation of accounting profit, accounting return and cash flow measurement systems, also, the advantages of EVA system are further discussed. The third chapter illustrates the problems that ABC Credit Guarantee Limited has after induction of EVA system for performance measurement and review, especially those problems with the reward motivation system. The fourth chapter reveals other problems ABC Credit Guarantee Limited has in the application of EVA system, including further discussion of project rectification, reward calculation, cost of capital, elimination of short term behaviors, also, suggestions are made for the improvement of enterprises' value management system. The fifth chapter draws out the conclusion and discusses limitations of this research.