Proceedings of World Business Research Conference
11 - 13 June 2015, Hotel Novotel Xin Qiao, Beijing, China, ISBN: 978-1-922069-78-8
The Motivation and Effectiveness of Adopting EVA® in China’s
Central Government-Owned Enterprises
Simon S Gao * and Jane J Zhang**
China’s central government-owned enterprises (CGOEs) were required to
implement Economic Value Added (EVA®) in 2010 as a part of introducing
innovative performance evaluation and management system required by the
State-owned Assets Supervision and Administration Commission of the State
Council. The aim of this paper is to shed light on the motivations in the
process of implementing EVA in China’s CGOEs and concerns from
corporate managers. In particular, this paper studies the effectiveness of EVA
application in Chinese CGOEs and the willingness of applying EVA by CGOE
managers.
This study is based on qualitative research methodology with the interview
data collection method. Based on nine interviews we find that EVA as a
concept has been widely known at the senior management level in Chinese
CGOEs, but less known at the divisional level. While divisional managers and
employees are less interested in implementing EVA as they do not see much
benefits of exercising EVA-based measures, senior managers view the
implementation of EVA as a good opportunity to demonstrate the success of
their leadership and discharge their accountability to the central government.
Senior managers also see the potentials of employing EVA as a corporate
control mechanism. Our results suggest that the adoption of EVA
performance measurement in China has been largely driven by political
motivations with a view to justifying that CGOEs have made contributions to
the economy under the Socialist Market Economic System as they have
produced a positive EVA.
JEL Codes: M40, M12 and M49
*Prof. Simon Gao, Edinburgh Napier University Business School, Edinburgh Napier University, UK. Email:
s.gao@napier.ac.uk
**Dr. Jane Zhang, Edinburgh Napier University Business School, Edinburgh Napier University, UK. Email:
ja.zhang@napier.ac.uk