Research On The Impact Of Implementing EVA On Over-investment In State-owned Enterprises

Investment decisions is an important factor in deciding whether to achieve sustainable development or create value.Because the level of business investment will affect the enterprise value,thereby affecting the interests of corporate stakeholders.We can also say that quality investment is a prerequisite for economic development.However,in recent years inefficiency investment is widespread in the state-owned enterprises in our country,resulting in enterprises can not be achieved added-value,a serious loss of state assets,and weakening the sustainable development capacity.Thus,since2010,the SAC introduce the EVA performance appraisal system to central enterprises,aiming to through implement this enterprise value-oriented performance appraisal system,to reduce over-investment in state-owned enterprises,improve the efficiency of investment,and increase the value of state-owned assets.With the gradual deepening implement of the EVA performance appraisal in central enterprises,local state-owned enterprises have also introduced EVA performance evaluation,and since 2010,the SAC continuously improve the weight of EVA,as in 2013,the weighting of the index has been 60%,which indicates that EVA has gradually becoming more and more important in state-owned enterprise.Then,after five years,whether the implementation of the SAC EVA performance appraisal can achieve the desired results in state-owned enterprises?In this paper,based on the moment that the SAC implementing EVA performance appraisal in central enterprises,and according to performance evaluation theory,basic investment theory,FCF hypothesis and corporate life cycle theory,using empirical methods,reveals the inner logic between implement EVA and over-investment in state-owned enterprises.This paper according to the path :“Literature review-Theoretical analysis-Model building-Empirical tests-Policy recommendations”.Firstly,the theoretical analysis method summarized the relationship between EVA appraisal and over-investment,the relationship between EVA?FCF and over-investment,and the relationship between enterprise life cycle and over-investment,then summarizes their merits and shortcomings.Secondly,based on the state-owned listed companies of 2010-2014,and by building the empirical model and using the ordinary least squares(OLS)regression analysis,carried out the following tests: whether EVA implementation weaken over-investment,and based on the perspective of life cycle,whether this weaken degree is different;whether EVA implementation weaken the relationship between FCF and over-investment,and based on the perspective of life cycle,whether this weaken degree is different.Finally,this paper gets the testing results and makes relevant policy recommendations.This paper shows that the implementation of EVA performance appraisal can not only effectively reduce over-investment.Meanwhile,this paper based on the perspective of the life cycle,studied the growth and maturity two life-stage companies,showed that in the growth life-stage companies,the implementation of EVA performance appraisal can inhibit excessive investment behavior,but its inhibiting effect is not significant.For the maturity life-stage companies,the implementation of EVA performance appraisal can significantly suppress the occurrence of excessive investment;And thus,based on the perspective of FCF,the implementation of EVA performance appraisal can significantly weaken the impact on free cash flow of over-investment.And this impact is more significant revealed in maturity life-stage companies.