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Does EVA Promote Innovation of Central Government-Owned Enterprises(CGOEs)?
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TitleDoes EVA Promote Innovation of Central Government-Owned Enterprises(CGOEs)?  
AuthorYu Minggui,Zhong Huijie and Fan Rui  
OrganizationEconomics and Management School of Wuhan University;; 
Key WordsReform of SOE; Privatization; Incentive mechanism;Corporate innovation 
AbstractThere are two different views about whether state-owned enterprises (SOE) need privatization reform. One view is that only privatization can thoroughly solve SOE efficiency problem. Another view is that privatization not only cannot solve the existing problems in SOE, but also may lead serious loss of state assets. Based on the revision of Interim Measures for Business Performance Appraisals of Persons-in-Charge at Central Government-Owned Enterprises in 2009, this study analyses the impact of the new EVA performance evaluation on corporate innovation. If this EVA performance evaluation which does not involve property changes of SOE can promote corporate innovation and performance, we can prove that privatization is not the key to improve efficiency of SOE. Using difference-in-differences method (DID), we find a significant increase of CGOEs innovation after EVA evaluation putting into force. Then we use a rich set of tests to show that the baseline results are robust to endogeneity and reverse causality. We further examine how EVA evaluation affects the CGOEs efficiency and indicate that the increase of innovation after this policy can further improve CGOEs operating performance. Consequently, we prove that privatization is not the only way to solve SOE efficiency problem. This study can clarify the controversy of privatization of SOE, meanwhile expands and enriches recent literature about incentive mechanism and corporate innovation. Our paper can also provide a theoretical basis and policy reference to further promote and deepen the reform of SOEs in China. 
Serial NumberWP1102 
  • Institute of Economics, Chinese Academy of Social Sciences
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