Empirical Research On EVA Valuation Validity

Along with the development of market economy and the change of financialmanagement goal of enterprise, investors, managers of listed companies and marketregulators pay more and more attention of the enterprise value. Mining the real valueof the enterprise is very significant for the managers to effectively improve businessdecision-making, the competitiveness of enterprises and business management ability.The traditional value evaluation system exist many defects. for example, theytake into account the cost of debt capital, but they ignore the cost of equitycapital,which lead to value evaluation can’t reflect the goal of shareholders’ wealthmaximization, excessively pursuit short-term profit, ignore the company’s businessrisks and shorten the life of enterprise. However, EVA value evaluation method takesinto account the cost of equity capital to make up for these deficiencies. EVA valueevaluation method has a unique advantage comparing with the traditional valueevaluation method, such as the evaluation tries to eliminate the impact of accountingdistortions and emphasizes the cost of equity capital and closely links the stockholderwealth and the company decision.At present the export of textile and garment industry has become the industryleader and tries to fulfill the$12.5billion annual export task. But some enterprise,especially small and medium textile garment enterprise met the financing difficulties,the low level of financial management and management rigidities, so to seek avalue-based management system has become very important.In this context, this paper studies EVA as the starting point for research. Theresearch centers the construction of EVA value evaluation model and application ofthe related issues. At the same time, this paper does a detailed analysis of the EVAvaluation method in our country textile and garment industry with the listed company,mainly focuses on model of the analysis and correction of the EVA and verifies thevalidity of the amendment of the model.In structure, this paper makes EVA index as the main line, using the theoretical analysis, empirical study and the case analysis to probe into the construction of EVAvalue evaluation model and application of the relevant problems. First of all, the paperanalyses the model of EVA to find out the lack of existing model to build correctionmodel; Secondly, the paper makes an empirical study to verify the effectiveness ofEVA valuation model with the status of the listed companies of China’s textile andgarment industry; Thirdly, EVA enterprise value evaluation model is applied toYounger Group which leads the textile and garment industry in the valuation of thecase studies; Finally, this paper propose the measures and suggestions for textile andgarment industry with listed company of our country for EVA value evaluation,which offer a new view for the value of the company management and the valueinvestment in order to achieve a certain social and economical benefits.By empirical research and case analysis of EVA value evaluation, we can drawthe conclusion: the approach of EVA valuation is more effective in the interpretationof intrinsic value than the traditional business valuation methods; EVA valuationmodel reflects the company’s intrinsic value more realistically, pays more attention tothe long-term development of the enterprise, provides new ideas for the valuation andoffers beneficial reference for the majority of investors.