Investment Efficiency And Capital Market Efficiency Of Listed Companies

From the beginning of our capital market, we aim to promote the development of the real economy through effective allocation of social capital.

However, the development of the real economy is also the foundation for the development of the capital market. The development of the capital market also needs the investment efficiency of the real economy as a support.

In reality, the speed of China's macro economy and capital market does not match. Besides the influence of investors' structure and irrational behavior of investors, the investment efficiency of listed companies is more worthy of attention.

Measurement of investment efficiency of Listed Companies in China

1. listing

Theoretically speaking, the level of corporate investment efficiency determines the level of corporate capital appreciation and ultimately affects the value of the company.

In practice, the practice community generally used accounting indicators to measure the profitability of the company to reflect the company's investment efficiency. However, these indicators do not consider the cost of capital of the company, which can not accurately reflect the company's ability to create value for investors in real terms.

The core idea of EVA is that capital investment is a cost, and only when the profit of a company is higher than the cost of capital will it create value for shareholders.

That is to say, when EVA is greater than 0, the company creates value for investors, and if less than 0, it is harmful value.

Therefore, the use of economic value added (EVA) as a measure of corporate investment efficiency can more accurately reflect the value created by the company for shareholders. It is the product of strengthening and developing the business philosophy of maximizing shareholder value.

Composition and measurement of 2.EVA index

This report draws on the mainstream algorithms in the current EVA computing method and uses the following formula to calculate the EVA net value:

EVA net value = net operating profit after tax - total investment capital * weighted average cost of capital.

Among them, the total investment capital equals the sum of corporate debt capital and equity capital; weighted average capital cost (WACC) = corporate equity / total assets * company equity capital cost + company leverage * interest rate * (1- corporate tax rate); company equity capital cost = risk free interest rate + beta value x risk premium; risk free interest rate equals 7 day treasury bond repurchase interest rate; risk premium is equal to market portfolio expected yield minus risk free interest rate.

Since the EVA net value is affected by the size of the company, we will further standardize the processing of the obtained EVA net value (EVA net value / total assets) by means of input capital to obtain a cross sectoral and cross industry comparison, and get the EVA return rate, which is used to reflect the incremental value created by every unit asset added by the company.

The higher the return rate of EVA, the higher the investment efficiency of the company.

3.EVA index

From the international experience, EVA is widely used to measure the efficiency of corporate investment.

However, the EVA method has not been widely applied in China. One of the reasons is that its measurement methods are more complex and difficult to measure. The two reason is that the EVA index depends on the accuracy of the capital cost measurement, and the cost of equity capital in the capital cost largely depends on the effectiveness of market pricing.

The development of China's capital market is still immature, and the stock price fluctuation is still large. This may lead to a high estimate of the cost of equity capital, which makes the EVA absolute value of the company measured in this paper lower.

Therefore, this paper adopts the comparative analysis method to analyze the relative value in order to avoid the systematic influence that the measurement method may bring.

Analysis of investment efficiency of Listed Companies in China

1. overall analysis

(1) the overall situation of investment efficiency of Listed Companies in China

When EVA is greater than 0, the company creates value, while on the contrary, it damages value.

We make statistics on companies that generate value creation over the past 2001-2013 years (see Table 1).

From the table, we can see that the overall investment efficiency of Listed Companies in China is low.

In the 13 years of 2001-2013 years, less than half of the companies were doing value creation, with an average ratio of about 30%.

After 2005, the proportion of companies creating value has increased, and the relative investment efficiency has increased. This may be related to the improvement of the allocation efficiency of capital market by the split share structure reform.

To further explore the impact of the investment efficiency of listed companies representing the real economy on the capital market, we give the relationship between the investment efficiency of the company and the return on the capital market (see Figure 1).

Figure 1 shows that in the 13 years of 2001~2013, the investment efficiency of listed companies is consistent with the overall trend of capital market.

Before 2005, the market overall return rate was highly consistent with the change trend of corporate investment efficiency. After 2005, the market overall yield curve generally focused on the trend line of corporate investment efficiency and returned to the investment efficiency curve.

Taking -2007 in 2005 as an example, the rise of the overall market income is far higher than the change in the investment efficiency of the real economy, which indicates that there may be a certain degree of bubble in the capital market at this time.

Then, with the stock market bubble bursting, the level of market returns gradually returns to the level of investment efficiency of listed companies.

This has a more early warning effect than the traditional accounting index ROE. For example, in the 2006-2007 years, the EVA return rate is negative, while the ROE index is still rising during the same period.

It shows that although the company has achieved high returns over the past two years, after deducting the cost of capital, the net value actually created is decreasing. That is to say, the investment efficiency of the company is actually very low at the moment, but the traditional accounting index can not warn this phenomenon.

Therefore, the value creation ability of the real economy is the basis for the development of the capital market. In the long run, the overall return level of the market is highly consistent with the change trend of the investment efficiency of the listed companies, and there is a return to the level of investment efficiency after the market return level deviates briefly.

(2) factors affecting the investment efficiency of listed companies

By decomposing the formula of EVA return, we can see that there are two determinants of investment efficiency: return on investment (ROC) and capital cost (WACC) (EVA rate of return = net profit after tax (total investment capital * weighted average capital cost) / total assets = net operating profit / total assets after tax - total investment capital * weighted average capital cost / total assets = input capital return (ROC) - capital cost (WACC)). The former represents the profitability of the company and positively related to investment efficiency, which represents a negative correlation between the cost of using capital and investment efficiency.

Then, is it the low profitability of China's listed companies, or the high cost of capital, which leads to low investment efficiency?

Figure 2 divides the EVA return of the company into two indicators: the return on investment and the cost of capital.

From the chart, we can see that in 2001~2013, the capital cost of Listed Companies in China is higher than the return on capital investment, and the difference between them is stable at about 10%. That is, the return on investment of the company can not make up for the cost of capital invested by the company, resulting in the overall EVA return rate lingering in the negative area.

We know that the capital cost of a company includes the cost of debt capital and the cost of equity capital.

The cost of debt capital is directly related to bank interest rate. The cost of equity capital is related to bank interest rate (to some extent, bank interest rate can be approximately substituted for risk-free interest rate), the level of capital market risk premium and the risk level of a single company.

According to statistics, the average leverage ratio of Listed Companies in China is about 47%, while the average annual interest rate of banks is 5.9%. The income tax rate is 25%. Roughly calculated, the debt cost accounts for about 30% of the total capital cost of the company.

That is to say, in most cases, the cost of equity capital of a company is the main factor determining the total capital cost of the company, and the cost of equity capital is highly related to the risk-free interest rate such as bank interest rate (see Figure 3).

Therefore, from a comprehensive perspective, the low investment efficiency of China's listed companies is related to the overall profitability of enterprises, that is, the low return on investment capital, but more importantly, it is related to the high cost of capital, especially the cost of equity capital.

2. classification analysis

(1) the difference between Shanghai and Shenzhen's main board is not significant.

We calculated the value creation ability (EVA rate of return) of the main board, Shenzhen board, medium and small board and GEM companies respectively, as shown in Figure 4.

From Figure 4, we can see that the average investment efficiency of different sectors is closer to the same quality. The investment efficiency of Shanghai and Shenzhen two cities is larger during the sample period, and the investment efficiency of small and medium sized board and GEM companies generally has a downward trend, which is lower than the Shanghai and Shenzhen board.

As mentioned above, the return rate of EVA is affected by two factors. The following are the analysis of the return on capital and capital cost of different sectors.

First of all, from the perspective of profitability (see chart 5), the Shanghai and Shenzhen motherboards show an upward trend year by year, and the average return on capital investment is 4%.

The profitability of Shenzhen board company during the sample period fluctuated significantly, with an average return on investment of 3%, slightly lower than the Shanghai stock market.

The profitability of small and medium sized boards and GEM companies has been decreasing year by year since the creation of the plate, which may be related to the over raising behavior of the companies at the initial stage of listing.

Among them, the average return on capital invested by small and medium-sized board enterprises in 2005 was 8.33%, which dropped to 4.84% in 2013, and the gem fell from 8.35% to 5.33%.

Generally speaking, the profitability of different plate companies has not been significantly different since 2013, all around 5%.

Secondly, from the view of capital cost (see Figure 6), the capital cost of small and medium sized boards and gem has been decreasing year by year, but it is still significantly higher than that of the main board of Shanghai and Shenzhen two cities.

This may be due to the higher value of the small and medium board and the gem, and the higher cost of equity capital.

Specifically, during the sample period, the capital cost of the main board Companies in Shanghai and Shenzhen two is about 7%, the average capital cost of the small and medium-sized board companies is about 7.8%, and the capital cost of the gem is about 9.2%.

As shown in figures 5 and 6, as time goes on, the difference in capital cost has more and more influence on the differences between the plates. By 2013, capital cost has become the main factor determining the difference in the efficiency of investment between sectors.

Looking at the above sections, the common characteristics of gem and small and medium board companies' profitability are that corporate profits are often difficult to sustain and tend to decline sharply after large profits.

Compared with the main board of Shanghai and Shenzhen two cities, the capital cost of gem and small and medium-sized board companies is relatively high, which reduces the average investment efficiency of the plate.

(2) Blue-chip company's investment efficiency is higher than the overall market performance.

Further, the investment efficiency (EVA rate of return) of Shanghai index 50, Shanghai 180 and Shanghai and Shenzhen 300 (2502.153, -3.91, -0.16%) index composition companies were compared, and compared with the average market level, we can see:

For index composition companies, Shanghai 50, Shanghai 180 and Shanghai and Shenzhen 30