| Since the21st century, the goal of the modern enterprise management changes to maximizing corporate value gradually. With the development of market economy and the constant improvement of China’s capital market, the transaction of enterprises began to appear, such as mergers and acquisitions, business restructuring, associates and joint ventures between enterprises. How to evaluate corporate value in reason become a increasingly concerned matter of enterprise stakeholders. All along, the traditional accounting indicators possess a dominant position of measuring corporate value. But they have some inherent defects. The deviate of measuring corporate value has been generated by using the traditional accounting indicators. They cannot be the objective and impartial evaluation of enterprise value. Therefore, finding a fair measure to evaluate corporate value becomes a top priority task.Economic Value Added indicator is generated in such circumstances. The Economic Value Added is equal to the residual value of after-tax net operating profit minus all of the company’s cost of capital. It is the real creating wealth of the shareholders. Compared to the traditional accounting indicators, its greatest feature is the accounting adjustments and taking into account the cost of capital, which makes reflecting the creating wealth and the value-added for shareholders become a reality. The Economic Value Added require enterprises to consider not only the debt capital, but also the equity capital, which allowing enterprises to realize that the shareholders’capital is not free. This eliminates the drawbacks of traditional accounting evaluation methods.As a new evaluation indicator, Economic Value Added first proposed by Stern&Stewart Company in the1980s. Then it is soon being used popularly at home and abroad, becoming a new type of modern enterprise management system and enterprise valuation method. Because the basic idea of the Economic Value Added is considering the cost of capital and protecting shareholders’wealth, this new indicator plays an important role in increasing the value of the capital of China’s listed central enterprises. The SASAC require all central enterprises within the scope of its regulatory should use Economic Value Added assessment system to replace the traditional accounting measure indicators to assess the performance of person in charge in Central enterprises from January1,2010. This can lead the central enterprises to improve capital efficiency and achieve sustainable development. The Economic Value Added indicators is not only the indicators to measure the business value but also the important method of improving the management of enterprise value. Each enterprise should establish the system of EVA-oriented value management for their own business according to the different circumstances of their own. However, the superiority of the Economic Value Added, in theory, is widely recognized, it is still controversial in practice. People doubt whether it applies to China’s capital market, whether it is superior to other traditional accounting indicators, as well as whether it is appropriate to design the EVA as the highest weight of indicators of the evaluation system of the person in charge in the central enterprises.This paper is written in this background. This paper researches the correlation of EVA and enterprise value of central enterprises listed on Shanghai Stock Exchange and Shenzhen Stock Exchange based on the research at home and abroad, which exploring the explanatory power of the enterprise value between EVA and traditional financial indicators and providing a reference for the use of EVA in China’s market.This paper is divided into five parts. The first part introduces the background and significance of the paper. Then describes the structure of the paper and the research methods, and points out the innovation and the inadequacies of this paper. The second part is the theoretical base portion. It introduces the theory of Economic Value Added, and the calculation rule, the superiority. It also analyze the development process and present situation of using economic value added in China’s central enterprises. Lastly, it analyze the relationship of economic value added and corporate value, which lay the foundation for the later empirical research. The third and fourth part is the empirical research. This paper select the central enterprises listed on the Shanghai and Shenzhen stock exchange. After screening, identified190enterprises to make up566sets of data across2010to2012.Then establish empirical model which suppose correlation analysis, regression analysis, multiple regression analysis to examine the explanatory power of economic value added indicators and accounting indicators of enterprise value. The fifth part is to summarize and make recommendationsThe innovation of this paper is calculating EVA with my own calculation formula. And compare the explanatory power of the economic value added indicators and traditional financial indicators of the enterprise value.In this paper, we can reach the following conclusions through empirical analysis. At this stage, the economic value added indicators of enterprise value has a linear relationship. The relevance is higher than the value relevance of traditional accounting indicators. But the relevance of them is not very high. The reasons might be China’s capital market is not perfect, and part of the economic value added data is difficult to obtain accurately. Therefore, We would be preferable to put the economic value added indicators and traditional financial indicators together. |
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