Study On Evaluation Of Enterprise Value Based On Reva

Accurate and reasonable evaluation of enterprise value can improve efficiency of decision makers, and help individual investors to make a wise decision, identifying the increasing potential and loss risk of the investment. Foreign research shows that, compared with the traditional valuation methods, REVA can explain the enterprise value better, more related to the enterprise value, and have advantages that other methods don't possess. However, research about the feasibility of enterprise evaluation based on REVA is rarely used in Chinese corporations. Whether REVA can really better explain the value of Chinese enterprises is still an issue to be resolved.The paper reviews and assesses the traditional enterprise evaluation methods, holding that the only use of the traditional methods is unable to reflect the enterprise value effectively. On the basis of EVA, the paper analyses the basic theory of REVA, as well as the accounting adjustments and parameters determination in REVA calculation.What's more, according to the positive correlation between REVA and enterprise value, we divide enterprise value into the original investment and REVA created in future so as to build the model of enterprise evaluation based on REVA. On this basis, the paper establishes an theoretical model with three variables—EVA,REVA and CMV(corporation market value). Using the original data and EVA data published by Stern Stewart&Co., the paper makes an empirical test on application of REVA in China. The test results show that both EVA and REVA are related to CMV but the correlation between EVA and CMV is closer.The paper argues that the lack of effectiveness of Chinese capital markets, the imprecision of accounting adjustments in REVA calculation and the selection of data etc. are all possible to affect the accuracy of enterprise evaluation based on REVA. So the paper points out that firstly, we can use enterprise evaluation model based on REVA to measure enterprise value as a reference; secondly, we should combine the internal situation of corporations with industry circumstance as much as possible to revise and estimate parameters when we use REVA evaluation model to improve accuracy of evaluation; thirdly, it would be best to use the model together with other evaluation methods. In addition, the non-financial factors should be taken into consideration.