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The role of non-financial indicators in the evaluation of performance of listed companies

Author: LiXueĦĦLiNa From: www.yourpaper.net Posted: 2009-06-13 08:39:38 Read:
[Abstract] compared with the financial indicators, market share, goodwill, quality of service, employee training, knowledge and intellectual capital and other non-financial indicators to better reflect the listed company's long-term, sustained development trend more accurately reveal listing the company's future development and growth trend, which can be more comprehensive, multi-angle reflects the operating results of listed companies can avoid financial indicators evaluate performance of listed companies due to the disadvantages of short-term operational behavior of the listed companies alone, the analysis and evaluation The performance of listed companies has an irreplaceable role.
[Words] of non-financial indicators; listed companies; performance evaluation

The performance evaluation is generally defined as a system on a regular basis to assess the value of an organization or staff. Evaluation of performance of listed companies, corresponding evaluation index system is designed in accordance with the listing of the company's operating goals, based on specific evaluation criteria, the use of appropriate evaluation methods, the operating results of listed companies in a certain period to make a fair, objective and accurate judgment. Evaluation of the performance of listed companies is one of the effective means to strengthen the management of listed companies. The performance evaluation standards for listed companies not only affect the future development and growth trend of the listed companies, and the impact of incentive and restraint mechanisms but also decided to build. This article intends to discuss issues such as the role of non-financial indicators in the evaluation of performance of listed companies.

First, the traditional performance of listed companies the evaluation and drawbacks

Traditional evaluation of the performance of listed companies focus on financial measures, mainly on the evaluation of the financial statements indicators data, belonging to the ex-post evaluation. The financial statements report on the economic activities of listed companies, the financial indicators inevitably has some limitations that these financial indicators reflect the listed companies in the past, history of operating conditions. This evaluation results of performance of listed companies make the lessons learned from listed companies, the direction for future development, while listed companies is also the basis of this information to managers to implement incentive. However, in this context, the objectives and the goal of the managers of listed companies is a short-term evaluation based on indicators have limitations, there are also short-term drawbacks of the incentive and restraint mechanisms to develop, not conducive to the operation and development of the listed companies in the future, and is only compatible with the time in which the operating environment and management requirements.
The traditional method of evaluation of the performance of listed companies only include financial indicators of performance, and does not include the results of non-financial indicators, and therefore can not fully reflect the comprehensive strength of the listed companies. Its main limitations: First, consider only obtain and maintain short-term financial results, fueled managers shortsightedness and short-term speculation, the listed companies are reluctant to invest in the development of future projects Fearing current earnings target to reduce that listed companies in terms of short-term projects to invest too much to invest, to create long-term value is too small, the potential for a lack of sustainable development. When the external competitive environment requires managers to the importance of non-financial indicators, such as market share, goodwill, quality of service, staff training and other factors, the traditional evaluation methods can not provide adequate action-oriented. Evaluation system is measured on the basis of the book value of the value of investors, both ignore the value of the assets of listed companies change the time value of money over time, it also ignores the opportunity cost of owner's equity, failed to take account of knowledge and intellectual capital, and other non- the impact of the financial indicators of the evaluation index system.
Needless to say, when specific performance evaluation method for the existence of environmental and business management requirements change, the performance evaluation system of the listed companies should also be corresponding changes, the only way to adapt to the needs of the operation and management of listed companies, in line with the market economy development. Today, human society has entered the era of knowledge economy, knowledge-based economy based on knowledge and intellectual capital-based economy, and the lack of evaluation of the performance of listed companies on the knowledge and intellectual capital evaluation system is imperfect. Confirmation of intangible assets such as knowledge and intellectual capital measurement, recording and reporting worldwide attracted widespread attention, and has caused the high degree of attention of the parties concerned, and as managers of listed companies can not ignore the invisible assets such as performance evaluation. As we all know, the more the knowledge economy era of corporate ownership and control of intangible assets, the stronger its capacity for sustainable development and competitiveness in foreign high-tech enterprise intangible assets have been as high as 50 to 60% of the proportion of total assets. Listed companies were good operating results, intangible assets and has a pivotal role. Therefore, the operating results of listed companies in the knowledge-based economy under the conditions of evaluation method should make the appropriate changes, upcoming non-financial indicators of performance evaluation index system of the listed companies listed company performance evaluation system has been improved and enriched. This is concrete manifestation of evaluation adapt to the needs of modern corporate management performance of listed companies.

Second, the establishment of the system of non-financial indicators and the performance of listed companies evaluate

In order to solve the drawbacks of traditional evaluation of the performance of listed companies not meet the requirements of the development of a modern market economy, should gradually establish a new evaluation system and standard of performance of listed companies, financial indicators and non-financial indicators combine.
First of all, it should be made clear that non-financial indicators by market share, goodwill, quality of service, staff training, knowledge and intellectual capital, such as evaluation and assessment to reflect. In addition, the innovation of listed companies should be the content of the non-financial indicators, that contains the listing of the company's research and development capabilities, technology and inventions into products or real productivity capacity and content. This is because the competitiveness of listed companies is a strong guarantee for the long-term development of the ability of listed companies and the performance of listed companies rising, but innovation is an important feature for the listing of the company's core competitiveness, vitality is a listed company has the most basic support elements. The innovations listed company limited resources reasonable configuration, can effectively resist risks. Listed companies in the era of knowledge economy, if there is no innovation performance, it will lack the core competitiveness, it is difficult to guarantee the success of the business strategy. Because the core competitiveness of the survival and development of listed companies must have a competitive advantage.
Secondly, listed companies must pay attention to the evaluation and assessment of non-financial indicators. Compared to financial indicators, market share, goodwill, quality of service, staff training, knowledge and intellectual capital of non-financial indicators to better reflect the listed company's long-term, sustained development trend, more comprehensive, multi-angle to reflect the listed companies results of operations, therefore, listed companies must pay attention to the evaluation and assessment of non-financial indicators, and complex to respond to the rapidly changing market environment. Despite the current lack of specific industry standards, there are no generally accepted quantitative operability and accuracy of the principles and standards of defects in the calculations and comparisons, but always continue to try and explore the need to go through, and gradually establish and perfect. Listed companies should be based on the corporate life cycle theory, combined with the specific circumstances of the company, each of listed non-financial indicators such as market share, goodwill, quality of service, staff training, knowledge and intellectual capital, specialized financial analysis methods, such as horizontal analysis, vertical analysis, trend analysis to reveal and reflect the future development and growth trend of the listed companies. It avoids a separate financial indicators evaluate performance of listed companies due to the disadvantages of short-term operational behavior of the listed companies. This trend is undeniable, and its role is becoming increasingly important.
Finally, the financial indicators should be combined with non-financial indicators of organic. Scientific evaluation, the Ministry of Finance and other four ministries on business performance on June 1, 1999 to the issuance of the "state capital performance evaluation rules" and "state capital performance evaluation of operating rules, which listed on the company's performance evaluation has some reference value. Listed companies in addition to specific financial indicators also need to assess the condition of capital efficiency, four of assets operating conditions, solvency status and development capacity situation, in order to fully reflect the operating condition and operating performance of its production. Listed companies from solvency, operating capabilities, profitability and development capacity in four areas staff, respectively, combined with the current ratio, quick ratio, accounts receivable turnover ratio and inventory turnover rate, net assets yield rate of return on total assets sustainable development ratio and asset growth indicators should be combined with modern requirements and characteristics of the management of the listed company's strategy, and a full range of analysis and evaluation of the performance of listed companies. Strategic competitive advantage is the listing of the company's core competitive advantage, and the formation and maintenance of this advantage is not only influenced by financial indicators, more subject to the influences of non-financial indicators. It can be said that the non-financial indicators that affect the critical success factors of listed companies strategic business indicators - non-financial indicators reflect the knowledge and intellectual capital into the entire strategic management process, the only listed company continuing competitive advantage. Third, non-financial indicators and incentive and restraint mechanisms
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