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1、嘉兴学院南湖学院外文文献翻译译文题目： 日本核泄漏事件前后我国渔业上市公司业绩变化研究 系 别： 商 学 系 专 业： 财 务 管 理 班 级：财 务 N091 学 号：2009451090926 学生姓名： 一、外文原文原文一：Performance Evaluation, Economic Value AddedAnd Managerial BehaviourFor the past two decades many countries started transforming their economies from traditional protected ones to those
2、 of more liberalized, globalized and market driven. This period has also seen the economies becoming more knowledge oriented and Human Resources started assuming more prominence in the growth of the economies and businesses posing a greater challenge for companies to acquire and retain talented work
3、force (especially at the strategic & managerial levels).The knowledge economy also started witnessing the rapid rise of the agency problem-conflict of interest between managers and owners. So it is very essential to align the interests of the mangers and shareholders or at least reduce the differenc
4、e between them. In this regard Economic Value Added has been seen as better alternative to the stock price and traditional performance measures.While successful EVA stories in the west are quite encouraging, Corporate India is slowly catching up the EVA adoption. Although not a panacea, EVA based co
5、mpensation plans will drive managers employ a firms assets more productively and EVA should help reduce the difference in the interests of the managers and shareholders, if not perfectly align them.1. IntroductionFor the past two decades many countries started transforming their economies from tradi
6、tional protected ones to those of more liberalized, globalised and market driven . This period has also seen the economies becoming more knowledge oriented and Human Resources started assuming more prominence in the growth of the economies and businesses. But this has also posed a greater challenge
7、for companies to acquire and retain talented workforce (especially at the strategic & managerial levels). The knowledge economy also started witnessing the rapid rise of the agency problem- conflict of interest between managers and owners. The managers in their role as the agents are expected to act
8、 in the best interests of the shareholders (principals). Managers will act in shareholders interests only if they have right incentives. So it is very essential to align the interests of the mangers and shareholders or at least reduce the difference between them.So we need a measure that on one hand
9、 rightly measures the managerial performance so that he managers with talent and greater mobility- can be suitably compensated (and hence retained) and on the other aligns the interests of the mangers and shareholders. For some time now Stock Price was thought to be an ideal measure achieving the ab
10、ove objectives. However stock price has many limitations. We shall discuss the pitfalls of stock price as a performance measure before evaluating some of the traditional performance measures and then introduce Economic Value Added as the right measure of managerial performance.2. Traditional Measure
11、s of Managerial PerformanceShareholders want the maximization of stock price (firm value). So can we measure the performance of a manager directly as reflected by the stock price-Reward managers when stock price goes up and punish them if stock prices behave otherwise? This approach has a major limi
12、tation. Stock price is driven by so many factors that escape from the control of managers, making it an inefficient measure of the true influence of the mangers on firms value. Changes in stock price-in the short run at least are not always accurate gauze of management performance due to the presenc
13、e of randomness and noise (Kang et al, 2002). Tying top management compensation to stock prices raises another difficult issue. The market value of a companys shares reflects investors expectations. The stockholder return depends on how well the company performs relative to expectations. Suppose a c
14、ompany announces the appointment of an outstanding new manager. The stock price leaps up in anticipation of improved performance. Henceforth, even if the new manager delivers exactly the good performance that investors expected, the stock will earn only a normal average rate of return. In this case
15、a compensation scheme linked to the stock return would fail to recognize the managers special contribution. An ideal performance measure should ensure that the managers would bear all the consequences of their own actions, but are not exposed to the fluctuations over which they have no control. In s
16、earch of such a metrictraditionally-companies are used to capture managerial performance and reward them through the operation based measures like Profits, EPS, ROCE and ROE. However these measures are not free from limitations. An appropriate performance measure should assess how managerial actions
17、 affect the firm value. For this to happen the performance measure must incorporate at least three things (Irala, 2005).a. the amount of capital invested b. the return earned on the capital and c. cost of capital (WACC) reflecting the risk adjusted required rate of returnIs there any measure that in
18、cludes returns, capital employed and the cost of capital employed in its computation? The Stern Stewart & company, a New York City based consulting firm answers this question positively and introduces its Economic Value Added (EVA).3. What is Economic Value Added?EVA is the Adjusted Net Operating Ta
19、x After Tax (ANOPAT) for a period minus the capital charge (the rupee cost of capital) of the investment over that period.EVA can be expressed asEVA = Adjusted Net Operating Profit After Taxes (ANOPAT) - Capital CostWhereANOPAT = Capital Employed (CE)*ROCE (as ROCE = EBIT (1-T) / CE)Capital Cost = W
20、ACCX Capital Employed (CE)ThusEVA = Capital Employed (CE) *ROCE - WACC * Capital Employed EVA = (ROCE - WACC) Capita l Employed Capital is generally measured by book value. WACC is the weighted Average of cost of Equity (generally measured by CAPM) and cost of Debt.4. EVA as a performance measureIf
21、managers are told that their performance is measured by EVA and compensation is liked to that, they would try to improve EVA by doing one or more of the following. A. Improve returns with the existing Capital B. Employ Capital productively C. Reduce the capital cost When managers do one or more of t
22、he above the value of the firm increases. So improving EVA theoretically improves the value of the firm and hence is a good measure of managerial performance. Whether they are contemplating entering new markets, setting product prices, adding new service lines, or making an acquisition, managers nee
23、d a way to value the alternatives and choose the ones that will produce highest value to the firm. Cash flow analysis can help them to do that, but EVA can help them more (Bhalla, 2004). 5. EVA and the Market Value Added (MVA)As noted earlier, the major attraction with EVA is that it is linked to th
24、e value of the firm and hence capable of signaling the value creation or otherwise of it.It is not too uncommon that the Market Value of a firm (Market value of Debt and Market value of Equity) either exceeds or falls short of its Book Value. The difference is the Market Value Added (lost). MVA can
25、be arrived at by discounting back the Future EVAs. MVA = Future EVAs discounted back Market Value of the firm = Book Value of the firm + MVA and with simplifying assumption that market and book value of debt are equal, Market Value of Equity = Book Value of Equity + Market Value Added The Market Val
26、ue of equity exceeds its Book value when the MVA is positive and in this case the Market Value of the equity is said to be at a premium. On the other hand it will be at a discount when MVA is negative. The MVA equals the Present Value of future EVAs (Pablo Fernandez, 2003). Exhibit 1 and Exhibit 2 c
27、apture the link between Market Value, EVA and MVAMarketValueofEquityMarket Value AddedBook Valueof Equity Exhibit 1. The relations hip between MVA and EVAwhen the market value of the firm is more than its book valueBookValueofEquityMarketValue LostMarket Value of Equity Exhibit 2. The relations hip
28、between MVA and EVAwhen the market value of the firm is less than its book value6. EVA adoption in IndiaCorporate India is slowly catching up. There had been a beginning with several companies like Godrej, TCS, Marico, Dr. Reddy s , Infosys, etc, adopting EVA in for different purposes. The EVA is cl
29、osely related to NPV. The Net Present Value of the project is the present value of the economic value added by that project over its life (Damodaran, 2002). Godrej Soaps group of six companies is one of the early adopters of EVA. Godrej had a multi-step variable bonus plan, where three levels of tar
30、gets were outlined. A salesperson who had reached level I would never aspire to do more unless he was sure to touch level II, because he would not get any additional bonus for being midway. It would be more beneficial for him to report it in the next financial years sales. The companys figures suffe
31、red as a result. There was clearly gap in communication between the management and the employees. “A measure was needed that would align the interests of the employee, the company and the shareholder”. Godrej implemented EVA based incentive scheme. Four out of the six companies have out performed on
32、 stretch targets in just one year and most employees made huge bonus receipts. Tata Consultancy Services has put almost all its 15,000-plus employees into EVA-linked variable pay. At Infosys, EVA is used as a tool to calculate the value delivered to customers. Infosys reasons that if it can tell its
33、 customers that what it is delivering in terms of value is higher than what the customer pays Infosys for the service. Marico Industries, worked out a simplified version of EVA (styled Seva) but uses it more as a signaling device to tell people that capital is important, that investments and acquisi
34、tions must have a justification in terms of shareholder value. Dr Reddys Laboratories does not use EVA as a measuring device to reward performance. However, it uses EVA as a qualifying criterion for granting performance-based rewards such as variable pay, performance bonuses and stock options (Jagan
35、nathan, 2004). Exhibit 3 describes the use of EVA at select Indian companies7. EVA & Managerial BehaviourAt the Godrej group, the entire business planning process is driven by EVA which will be applicable to about 2,500 employees. EVA will be the main financial parameter by which we measure our perf
36、ormance. It will be also used in all capital expenditure decisions including acquisitions. The objective is to make all employees think like owners which would lead to an entrepreneurial culture this should be strongly supported by an open-ended variable remuneration scheme. This plan provides desig
37、n flexibility, ensures alignment between employees and shareholders, and significant motivation can be achieved with reasonable retention risk and shareholder cost .CompanyThe usage of EVAGodrejAs a measure that aligns the interests of the employee, thecompany and the shareholderTCSAs a performance
38、measure linked to compensationInfosysAs a tool to tell its clients that the value delivered by Infosys isgreater than what the client pays for.MaricoAs a signaling device to tell its employees that capital isimportant.Dr. ReddysAs a qualifying criterion to grant rewards such a variable pay,stock opt
39、ions and performance bonuses.Exhibit 3. The Use of EVA at Select Indian companiesTejpavan Gandhok, managing director of Stern Stewart India argues “If you seek to maximize EVA in the long run. People will be much more bottomline conscious - andconscious about sustainable results - because their own
40、in centives are tied to getting a part of the action. The real benefit from EVA comes from making it a way of life inside the company. Essentially, the comparison between EVA and ESOPs is in terms of their relative effectiveness in inducing the desired managerial behaviour. In small start-ups, emplo
41、yees would be more keen to be rewarded by ESOPs. In large and diversified organisations I suspect EVA would be preferred by employees. (Jagannathan,2004). At TCS, about 1,000 employees have left in the first quarter 2004-05 financial year. This, according to sources in the company, is a result of th
42、e salary model based on the economic value-added (EVA) that was rolled out two years ago. Those exiting, they maintain, are primarily the non-performers. The EVA model involving assessment, retraining and exit discussions moves on a two-year cycle and the last quarter was the first one when its impa
43、ct kicked in. Under a new five-tier appraisal system, a large percentage of those who have left were classified as non-performers. They were given low rankings for the second year in a row and failed to show signs of improvement despite undergoing a mentorship program me. Sources in TCS, however, sa
44、id it was a conscious move by the company to enhance result-orientation among its employees. Accor ding to the new EVA-based system, every employees salary has a fixed and a variable component. The variable component of the pay takes into account the performance of the individual and the company (Si
45、nha, 2005) . 8. The EVA, MVA and firm value: Empirical EvidenceWhile Joel stern(2001) argues EVA provides a signal to the investors that this management is more likely to achieve the expected return on book capital employed, and might warrant higher price to earnings ratios be cause they are likely
46、to engage in less potential waste, Empirical studies have outlined mixed findings-some of them diametrically opposite. There is only limited support for Stewarts contention that the adoption of EVA is associated with greater increase in MVA (Linda 2000/2001). Improving EVA performance is associated
47、with a higher stock return. However the association of EVA with stock return is not as strong as suggested in anecdotal EVA stories (Chen and Dodd 1997). There is no indication what so ever that EVA is conveying any statistically significant signals different from the traditional performance indicat
48、ors (Malhotra, 2001). EVA is the single largest and most consistent variable which had a decisive role in accounting fro changes in MVA (Bhatnagar and Sekhar, 2001).9. Conclusion While successful EVA stories in the west are quite encouraging, empirical research is not sufficient to establish the claim of EVA as a better measure as well there is
