A Study On The Impact Of EVA Evaluation On Investment

On the background of 'new normal' with the situation of lower growth speed as featres,China has adapted its macro-control policies to guide enterprises to optimize the industrial structure and govern non-efficiency investment.The investing behavior of state-owned enterprises,which is a mainstay of the national economic development,has become the focus of the national macro-control.The SASAC published "Business Executives of the State-owned Key Enterprises Performance Evaluation Interim Provisional Measures(Provisional Version)" by the end of 2009,and issued the formal documentation on December 12(th),2016.With policy changing from 2009 to 2016,our government has made great effort to guide enterprises to invest reasonably.And the Economic Value Added(EVA)has become a main index to evaluate the performance of top executives.The governance function of EVA performance evaluation in non-efficiency investment has drawed public attention during recent years.Many scholars empirically studied the impact of this policy on over-investment,and confirmed the governance function of this policy in over-investment.However,there are little literature of under-investment.It is commonly believed that the high-speed development of state-owned enterprises is driven by large-scale investment in the fixed assets after the organizational reform.Therefore,it can be easy to ignore the analysis of under-investment.Based on this background,this paper empirically studies the relationship between EVA performance evaluation and the tendency of under-investment using data of A-share state-owned enterprises during 2007 to 2014.The main ideas of this paper are as follows:first of all,this paper proposes that the EVA performance evaluation can restrict under-investments on the basis of combing the relevant theories and literatures,and then analyzes the degree and trend of under-investments.Secondly,the empirical research and the after tests confirm the governance function of this policy in under-investment.Thirdly,this paper proves that EVA performance evaluation serves different functions in restricting under-investments of state-owned enterprises,which have different fixed assets ratios.Finally,the relevant suggestions of this policy are put forward according to the conclusions.The conclusions show that the inefficient investment of state-owned enterprises is serious including underinvestment,and EVA performance evaluation has a significant governance function in the under-investment of state-owned enterprises.However,the efficiency of this function varies with the different fixed assets ratios.Compared with the companies with lower fixed assets ratios,those with higher fixed assets ratios are less affected by this policy.Why it's innovative:first of all,based on relevant theories and literatures,the author here in the essay advances her viewpoint,which is proposing a new grouping variable.Secondly,the relevant suggestions of optimizing EVA performance evaluation are put forward according to the conclusions to guide state-owned enterprises to invest reasonably.As there is little literature in this respect at present,this paper expands the research fields of EVA to a certain extent.At the same time,the research results provide theoretical and empirical evidences for the SASAC to continue implementing EVA performance evaluation policy.It is of practicable significance in improving the accuracy of the policy and perfecting the system of incentives and restraint of Chinese enterprises.