EVA Assessment,the Efficiency Of Investment And The Value Of Cash

January 1,2010,the State Council and the SASAC revised the interim measure,named "Interim Measures for performance evaluation of central enterprises'responsible person".All the central enterprises needed to begin using the EVA as the assessment measure.It means that when evaluating managerial performance,the comprehensive use of accounting profit and EVA are needed,while the share of EVA should be 40%.Until December 29,2015,EVA assessment is applied to the direct management of the SAC central enterprises,and the results of the EVA assessment directly linked to the remuneration,appointment and dismissal of the responsible person in the enterprises.However,given the immatureness of our capital markets and specificity of the central enterprises,can the implementation of EVA assessment achieve the purpose of Value Management?Can it guide the central enterprises' managers' behavior?How does it affect the enterprises?Can the implementation of the assessment methods will help enhance corporate value of cash holdings and thus enhance corporate value?And is the method suitable for widespread to the local state-owned enterprises and non-state-owned listed companies?These problems remain unsolved and need to be researched.In this paper,we take the opportunity to use empirical methods to investigate whether inhibition of EVA evaluation companies'inefficient investment behavior is restrained,and whether inhibition by restraining the inefficient investment behavior can enhance the value of the cash holdings.In the specific arrangement of contents,this paper has the following six sections:The first part is introduction.The main topic of the article describes the motivation,the research background and significance,and on this basis,this paper introduces the framework and main content,and tell other researchers which points are extremely new to discuss.The second part is the literature review.This section reviews the EVA assessment,inefficient investment and literature related to the value of cash holdings,focusing on the motivation of non-efficiency investments,resulting in the development and application of EVA performance evaluation and non-efficiency of investment and cash management hold value in three areas,and on this basis of previous studies and research focus for analysis,and tap new areas to research.The third part first show the analysis based on theories and then summarize the assumptions.This section support the article with the basic theories,respectively,from the principal-agent theory,free cash flow hypothesis and information asymmetry theory and expand the analysis,combined with institutional background of China's enterprises and research scholars before,leads to performance evaluation and implementation of EVA non-investment relationship between enterprise efficiency.On this basis,the analysis of the central enterprises through the use of EVA assessment to suppress non-efficiency investment,the enterprise value of cash holdings by what kind of impact.Finally,the article proposes the hypothesis.The fourth part is the study design.It contains the standards of selecting data,and lists all of the variables.Central article listed companies selected for the sample directly under the State-owned Assets Supervision Commission,the study period from 2009 to 2014,after excluding financial companies,ST company and incomplete data of the company,received a total of 1144 data samples.The fifth part is empirical test.This part of 2009--2014 years,the central enterprises in Shanghai and Shenzhen A-share listed companies for six years as sample,then use descriptive statistics to give a glimpse on the data,then using correlation analysis to confirm that all the data are not relevant,finally using the multiple regression analysis to get the conclusion.Regression analysis showed that,assuming 1 was verified that the EVA assessment in mandatory central rate of the central enterprises to contribute to the suppression of non-efficiency investment and reduce the degree of excessive investment,improve underinvestment.Hypothesis 2 by EVA assessment to curb excessive investment,the value of cash holdings of enterprises significantly be enhanced;but not through lack of investment and improvement to enhance the value of cash holdings for the implementation of insufficient investment in central enterprises samples,EVA assessment.The sixth part is conclusions and recommendations.After knowing the empirical results of the foregoing,combined with the corresponding theory,the conclusions of this study were summarized,policy recommendations,and limitations of research paper points out possible future improvements.The innovations of this paper are the following points:(1)Providing new ideas to enhance the value of cash holdings.Based on principal-agent theory,contract theory,free cash flow hypothesis on the relationship between EVA assessment,inefficient investment and the value of cash holdings which has been discussed through hypothesis,test the hypothesis through empirical research,to provide a new way of thinking to the managers of the enterprises to enhance the value of cash holdings.(2)Adding mediating variables in empirical tests.In examining the impact on the value of holdings EVA assessment of corporate cash,the paper added mediating variables.Based on free cash flow hypothesis,EVA assessment could prompt implementation of business executives consider the cost of equity,prudent use some cash held by companies,so as to enhance the value of corporate cash holdings.Therefore,this article was added to the mediating variables,empirical test of the hypothesis 2,EVA assessment study whether the application can achieve the purpose to enhance the value of cash holdings by way of non-inhibition efficiency of investment.