Study Of The Impact Of EVA Appraisal Module On The Financial Behaviors Of The Central Enterprises

Since 2010,SASAC fully pushed EVA as an indicator of the performance appraisal system,and further increased and refined the share of EVA in the performance appraisal system in 2013.This reform marks the start of a new era in management with EVA at the core,means the transition of Chinese government's management theory.SASAC inserts EVA into index system of performance in order to improve the quality of accounting information,the performance and the market competitiveness of central enterprises,and reinvigorate themselves.It's been six years since this method implemented,there are some major concerns,including how well it pushed and whether it works.As assessment objects by SASAC,head of the central enterprises may adjust financial behaviors to optimize EVA.In view of the above-mentioned possible behaviors,this paper attempts to explore the changes of financial behaviors of central enterprises before and after the implementation of EVA performance appraisal system from the following three aspects:ratio of interest-bearing debt,cost of interest-bearing debt and preference for equity finance,uses public listed company data between 2007 and 2015,posits that the use of EVA performance appraisal system may make central enterprises tend to improve debt ratio,accept expensive debt,and reduce equity finance.We further divide the period between 2007 and 2015 into two periods:2007-2013 and 2011-2015,to build DID models respectively to test above hypothesis.The results show that in the first period,the use of EVA system negatively relates to ratio of interest-bearing debt,and is irrelevant to both cost of interest-bearing debt and preference for equity finance;in the second period,deep use of EVA system is irrelevant to ratio of interest-bearing debt,positively relates to cost of interest-bearing debt and negatively relates to preference for equity finance.In conclusion,we suggest that central enterprises could enhance the efficiency of using capital and establish new value concept,and SASAC could create a more comprehensive performance appraisal system which includes non-financial information,consider whether the use of EVA could freed up market interest rates.