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Economic Value Added, Corporation Growth and Overinvestment—Based on State-Owned Corporations

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DOI: 10.4236/me.2016.714144    1,516 Downloads   2,227 Views Citations
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ABSTRACT

This paper analyzes if EVA (Economic Value Added) evaluation system can reduce the corporations’ overinvestment phenomenon by using the study sample of 204 listed SOEs (state-owned corporations) with the sample period from 2007 to 2012. Then according to Tobin’s Q value, we divided all the 204 listed SOEs into two groups, high growth corporations and low growth corporations, and observed if the implementation of EVA has different inhibition effect on the listed SOEs of different growth. The results indicated that EVA can’t significantly reduce the listed SOEs’ overinvestment, but it has different inhibition effect on different growth corporations. The EVA can significantly reduce low growth listed SOEs’ overinvestment, which suggests the EVA evaluation system can improve low growth corporations’ investment situation.

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Wang, Y. and Wang, Y. (2016) Economic Value Added, Corporation Growth and Overinvestment—Based on State-Owned Corporations. Modern Economy, 7, 1640-1652. doi: 10.4236/me.2016.714144.

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