Analysis To The EVA Performance Evaluation’s Implementation Effect Of The Listed Companies In China

In recent years, the issue of enterprise performance evaluation has received more and more attention by scholars at home and abroad, and it has become the most popular topic in the field of financial management at home and abroad. Stern and Stewart, who were the founders of American Stern-Stewart management consulting company, proposed the concept of economic value added (EVA) in 1982. Later, Stern and Stewart made a complete description of the concept on the "Fortune" magazine, and the substance of the EVA concept was the extension of "residual income". As a new performance evaluation tool, EVA can truly reflect the performance of enterprises, and has got more and more attention from both academic and practical sessions. Thus, the performance evaluation system based on the EVA index is gradually formed, and has obtained the widespread attention and recognition. EVA is based on the value management, focusing on enterprise manager’s value creation. It is not only a multifunctional indicator, but also a tool for the evaluation and incentive, a new way of thinking. After nearly thirty years of continuous promotion and use, EVA concept has received wide attention and recognition in the international arena, and it was hailed as "today’s hottest financial idea" and "a new key of value creation" by the American "Fortune" magazine. Since then, the performance evaluation system, taking EVA indicator as its core, has been widely used in various industries for companies operating and financial management. In China, since 2001, Stern-Stuart Management Consulting Chinese branch, has been ranking Chinese listed companies mainly according to EVA indicator, launching a series of "Chinese Listed Companies wealth creation and destruction lists". Then, the central SASAC began to encourage companies to introduce EVA and the implementation of EVA performance evaluation pilot in 2007. The SASAC asked all of the State-owned enterprises to introduce the performance evaluation based on EVA comprehensively in 2010. The EVA indicator is an important part of overall performance, and an important reference for the appointments and dismissals. But how to implement the EVA performance evaluation? Can make nothing of it.This paper selected a private listed company--Fosun Pharma, which early introduced EVA performance evaluation mechanism, as a case. By contrast with the operating performance of Kangmei Pharma, which is Fosun Pharma’s Competition in the same industry enterprises, this paper studied the implementation effects of of EVA assessment. This paper selected Kangmei pharma as a contrast analysis object of Fosun Pharma, the reason is that both Fosun Pharma and Kangmei Pharma are belong to the pharmaceutical industry, have a similar size of the company, and are privately held listing corporations. In this paper, the indicators used to observe company operating performance not only include EVA, but also include sales profit rate, total assets turnover, investment multiplier, stock gross earnings and stock excess returns. By comparison analysis with Kangmei pharma, this paper found:After the introduction of EVA evaluation mechanism, Fosun Pharma has not achieved significant improvement in performance. If we weed out the huge amount of investment income, which is brought by Fosun Pharma’s subsidiaries listed in 2009, the management of Fosun Pharma did not increase the wealth of investors.This study also found that Fosun Pharma and Kangmei pharma difference in the equity structure.The main difference is reflected in a higher degree of separation Fosun Pharma’s largest shareholder control rights and cash flow rights, which could lead to major shareholders tunneling. Therefore, this paper examines the relative situation of Fosun Pharmaceutical Health America Pharmaceutical borrowing funds at the level of total assets and related transactions and found that the presence of significantly higher Fosun Pharmaceutical Health America Pharmaceutical lending funds/Total assets level. Fosun Pharma’s related party transactions proportion of income is quite high, in 2006, in 2009 this proportion is close to 50%, in 2007 this proportion is as high as 71.9%, which control rights and cash flow rights separation could lead to major shareholders dig empty expectation. The separation of control rights and cash flow rights could lead to major shareholders hollowed out, and it is consistent with the previous expectations. This paper argues that this may be the main reason for Fosun Pharma unable to successfully implement EVA performance evaluation. Finally, the paper draws the conclusion:Good assessment and incentive mechanism should be established on the good corporate governance, which mainly refers to the corporate governance of Chinese characteristics control imbalance, caused by a high concentration of shareholding. To establish an effective EVA performance evaluation and incentive mechanism, this paper argues that:First, we must limit the grabbing hands of major shareholders plunder; Secondly, we must set a reasonable cost of capital in order to ensure sufficient pressure to induce managers to create wealth for its shareholders; Thirdly, we have to give enough rewards and punishment in order to make sure the enthusiasm of enterprise management.