A Research On The Relationship Between Improved EVA And Share Price Based On Panel Data

In recent years, securities investment has become the best choice for many investors because people are getting much wealthier and get to know a lot about financial management along with China’s economic prosperity. And the core content of enterprise value is most concerned by both investors and listed companies. Generally, the value of listed companies can be measured by the traditional accounting indicators, however, the traditional accounting measure failed to consider the cost of equity capital so that the assessment of enterprise value deviates. Because of the defects of traditional accounting measures, the introduction of EVA reflects the company’s value more correctly by fixing that weakness. However. EVA has flawed too. It fails to take full account of the cost of corporate cash flow and liquidity risk. Therefore, another indicator is introduced as a replacement of EVA which is improved by adding the cost of equity capital, and help enterprises strengthen management of cash flow and liquidity risk preventionIn the paper, through empirical studies the writer has shown that the improved indicator is superior to EVA in explaining stock price volatility based on the existing theories of EVA. This paper mainly discusses from five parts. At first valuation theory are stated, the traditional valuation models and economic value model are compared then the relationship between enterprise valuation are pointed out.Secondly the article states the EVA-related theory, describing the background, functions,and advantages and disadvantages of EVA. Thirdly article introduces the improved EVA which is called CEVA by fixing up the defects of EVA; finally article takes listed companies in the steel industry as samples and proves that CEVA is superior to EVA in explaining stock price volatility and guiding investors investing in securities through the establishment of a panel data model. In addition, the article also does the further research in agricultural industry. In the end, based on the conclusions of the article, the author gives the corresponding recommendations.