Research On The Application Of Relative Performance Evaluation

Enterprise performance evaluation is the basic premise of enterprise management. To stay in an impregnable position in today’s increasingly competitive society, a company not only need to implement strategic management, but also has to "know yourself and know your enemy". This depends on the relative performance evaluation, which is carried out in form of the comparison with reference objects. Following "the same industry, the same scale" principle, and combining with the international situation, economic environment, industry life cycle stage and enterprise actual situation, State-Owned Assets Supervision and Administration Commission evaluates the performance of executives in charge of enterprises according to the "Interim Regulations of Operating Performance Evaluation on the Executives in Charge of Central Enterprise" revised on December28,2009. This suggests that the relative performance evaluation has gradually been applied in practice. On one hand, through relative performance evaluation, the enterprise can eliminate the effects of uncontrollable market factors on the performance evaluation, objectively understand their competitive advantages and disadvantages, and pinpoint themselves accurately, which is beneficial to the strategic development of enterprise. On the other hand, enterprise performance evaluation is helpful for companies to objectively estimate operation performance of executives and promote the effectiveness of executive compensation incentives. Therefore, research on the application of relative performance evaluation is very necessary.The main research content of this paper includes the following several parts. The first part is introduction, in which this dissertation introduces the background and significance of this research, reviews pertinent literature at home and abroad, and generally states the research ideas, research methods, innovations and shortcomings. The second part analyzes the theory and practice foundation of relative performance evaluation. Firstly, this part describes the related concept of relative performance evaluation, illustrates the advantages of relative performance evaluation compared with the absolute measures of performance evaluation. Secondly, this part expounds fundamental theories such as benchmarking theory, principal-agent theory, incentive theory and strategic management theory. Finally, this dissertation presents the existing performance evaluation methods, and respectively analyzes their advantages and disadvantages. The third part focuses on the core content of the application of relative performance evaluation, namely the construction of performance evaluation index system. Basing on the principle of index design, this dissertation clarifies the components of index system, and selects indicators to build index system. The fourth part empirically examines the application of relative performance evaluation in the state-owned listed companies. After factor analysis on selected sample data using SPSS software, the dissertation gets the comprehensive score and ranking of each firm-year observation. Then, we analyze and evaluate the results using market, industry and region as reference object, and find out that the elimination of the influence of uncontrollable factors can improve the accuracy of the enterprise performance evaluation. The fifth part introduces the research conclusion of this paper and puts forward relevant policy recommendations and research prospects, so as to promote the development of relative performance evaluation application.The features and innovation of this research are reflected in research perspective and content. On research perspective, we break through the confine of traditional absolute basis for performance evaluation, bring in reference objects, and research relative performance evaluation. Relative performance evaluation research starts late in our country, and achieves few outcomes. So it’s a brave attempt for this dissertation to carry out systematic analysis on relative performance evaluation. On research content, this dissertation break through the one-sidedness that related scholars only focus on the research on the relationship between relative performance evaluation and operator performance, and comprehensively study and analyze the application process of relative performance evaluation. At the same time, compared with the limitation that majority of scholars use single index in relative performance evaluation, this dissertation builds a set of performance evaluation index system. It is the core content of the application of relative performance evaluation and an effective approach to give full play to the role of relative performance evaluation. Therefore, this dissertation starts from the analysis of theory and practice foundation of relative performance evaluation, and builds performance evaluation index system. Comprehensively considering market indicators and accounting indicators, we empirically examine the application of relative performance evaluation using factor analysis method. Taking the enterprise ownership into consideration, we select state-owned listed enterprises as the research sample, and test the different results of relative performance evaluation under different reference objects. Finally, this dissertation puts forward some policy suggestions for the development and application of relative performance evaluation to promote the application process of relative performance evaluation, and this is infrequent in domestic research.