Study On Application Of EVA In The Performance Evaluation Of State-owned Enterprises

State-owned enterprises play an important role in the socialist market economy of China as well as the development of our national economy. In recent decades, with the intensified global competition and the implementation of the shareholding system reformation, the operational efficiency and management at state-owned enterprises have been improved continuously. At the same time, the operation principle has been changed, too. Focused on the history of the state-owned enterprise performance appraisal system development, we get to know that SASAC’s performance evaluation of state-owned enterprises are no longer confined to the traditional performance evaluation index, such as revenues and profits and other revenues and profits, but will gradually shift the focus of the enterprise is to the ability of creating added value.Although they have been developed and applied for many years, the profit-oriented traditional performance appraisal indicators have their disadvantages. For example, it only takes into account the cost of debt capital to the firm in the calculation without the cost of equity capital, resulting in pooly reflection of the acutal operating performance of the enterprise. Furthermore, it cannot be used to predict the accurate ability of creating added value. However, the EVA (namely Economic Value Added) refers to income after deducting the full cost of capital, including equity and debt, from the corporate after-tax net operating profit. The key point of this concept is the consideration of cost of equity capital, which requires managers to have a sense of the cost of capital to improve capital efficiency and the ability of enterprises to create value. Finally, it will benefit the shareholders. At the same time, it also contributed to the interests of business owners and managers can be more consistent, and promote the sustainable development of enterprises. Based on this, the implementation of the SAC since 2010 in all central enterprises to EVA as the core value-oriented assessment to guide the central business investment decisions became more scientific and improve the ability of enterprises to create value, and establish a correct principle.In this paper, using the method of case studies and comparative analysis of selected samples of Hefei Department Store Group Co., Ltd., state-owned enterprises in the application of EVA Performance Evaluation study. This paper is divided into five parts. The first part was an a general introduction to the research background and significance, methods, and other well-reviewed literature. The second part was an overview of the theory in enterprise performance evaluation and EVA.The third part described the history of SOE performance evaluation system development and the analysis of traditional performance evaluation index. The fourth part demonstrated the case study of Hefei Department Store Group Co.,Ltd.. The analysis focused on the calculation of EVA and the comparison with traditional performance evaluation. The results showed the advantages and limitations of EVA methods as well as final recommendations for improvement. The fifth part was the conclusion and prospect, we summarized the conclusions based on the research study. What’s more, we addressed the disadvantages in the research process as well as the future work to improve the method.As a new performance evaluation method, EVA includes the equity cost of capital, which is line with the trends and meest the need of modern enterprise development. What’s more, it shows a stronger superiority and vitality than the traditional methods. We should combine the specificities in Chinese market into the EVA method in order to bulid a complete system. Therefore, we can apply the EVA methods in the socialist economy more efficiently.