Analysis On The Value Capacity And Its Driving Factors Of Listed Real Estate Companies

In recent years the real estate industry has stepped into a fast growing stage, in whichmost participants of the industry put a great emphasis on large-scale development.Companies stressed on getting “bigger” and focused on profit growth, which broughtabout many problems such as the increase of administrative costs, ignorance of costshares and lack of investment efficiency. Developed by Stern Stewart&company in1982, EVA (Economic Value-Added) stresses that benefits can be created for theshareholders only if the gains generated exceed the capital invested. EVA successfullycoordinates the targets of managers and that of capital providers, so it will help tomaximize the values of the company and the shareholder. Through the introduction ofEVA, this paper intends to help real estate companies to realize the economic cost ofequity capital, by which the blind enterprises expanse will be prevented andmanagement concepts of creating value for shareholders be established.In this paper, a method of normative and empirical analysis is combined to analyzethe value-created ability of public real estate companies in China. In the followingpassages, we will first introduce the background, purpose and significance of thistopic, as well as a review of domestic and foreign study on the EVA to summarizetheir research ideas and possible innovations. Then we will discuss about thetheoretical basis of economic value added. Followed by the discussion, an in-depthanalysis on EVA formula will be taken to determine which accounting item should beadjusted to calculate the EVA value of real estate listed companies, according to theprinciple of EVA accounting adjustments and the characteristics of the real estateindustry in China. Furthermore, we will investigate the necessity of theimplementation of EVA as a performance evaluation method in China real estatecompanies by analyzing their unique characteristics. In the third part, we select61listed real estate companies in Shanghai and Shenzhen stock market as samples tocalculate their economic value added (EVA). The results show that the operatingperformances of China listed real estate companies are not optimistic. Finally weconduct an empirical analysis on the factors (macro and micro) related to EVA valuecreation of China listed real estate companies. A discovers is found that financingcapacity, degree of diversification and operational efficiency significantly influences the EVA value while the influence from other factors is less obvious. According to theresearch results, we suggest that China listed real estate companies can enhance theirvalue-created ability by strengthening financing capacity, improving operationalefficiency and devoting to professional development, etc.