Research On Performance Evaluation And The Suitability Of EVA Of Financial Holding Company

With the further development of China’s economy and its company, managers come to realize the necessity of performance management in the company. In face of increasingly complex business environment, how to effectively and properly evaluate the company operating results has become a big problem during management. As one of the evaluation index, EVA (Economic Value Added) was introduced to China around2000. However, restricted to the development of China’s company scale and capital market environment, basically only state-owned enterprises under SASAC apply EVA as one of performance evaluation index at present. Not all companies are suitable for EVA, whose application needs the combination of inside and outside environment factors. China’s financial institution development has attracted worldwide attention, given its risk factor, the performance evaluation of financial institutions is more complex than other industries. For financial institutions to use EVA as a performance evaluation method, currently most academic research focuses on banks, some securities companies and fund companies. They seldom involve financial holding companies in the application of EVA during performance evaluation. Hence in this paper, using qualitative and quantitative analysis, comparative analysis and case analysis method, the author makes a breakthrough to argue whether EVA can be applied in certain financial holding companies like C Company.First chapter of the paper mainly states research background, research purpose, research methods and the innovation points of the paper. The second chapter reviews research achievements related to the thesis theme, including the performance evaluation of financial institutions and the applicability and feasibility of EVA at home and abroad. The third chapter mainly introduces the theory of EVA performance evaluation system, EVA development process, EVA characteristics and its advantages and disadvantages. In the fourth chapter, define the financial holding companies and the performance evaluation of financial holding companies, and introduces its organization mode and rules for the performance evaluation of financial holding companies, and the difficulty in evaluation of financial holding companies. Chapter5takes C Company as an example, to analyze internal and external factors affecting EVA in its implementation, and use EXCEL to analyze the correlation between EVA results and MVA (Market Value Added), compared with the traditional indicators of performance evaluation and MVA for five periods, and then puts forward suggestions on its establishment and implementation of the EVA system. Chapter6summarizes whether C financial holding company is suitable for implementation of EVA and the deficiency existing in this thesis.The demonstration of the suitability mainly comes from qualitative and quantitative analysis, in which qualitative analysis mainly includes seven factors, i.e. capital market environment, the availability of statistical data, enterprise culture, organization structure, financial strategy, financial information system and whether listed or not. Quantitative analysis is validated by how strong EVA and MVA are correlated, compared with related degree of traditional performance evaluation index, such as ROE (Return on Equity), ROA (Return on Assets), EPS (Earnings per Share) and MVA. Analysis results show that the EVA index is suitable for C Financial Holding Company. And suggest that C Company could use it combined with RAROC (Risk Adjusted Return on Capital), KPI (Key Performance Indicators), BSC (Balanced Scorecard) together, to maximize the benefits of using EVA index.