Evaluation of Public Sector Enterprises Performance: Application of Economic Value Added

Pawan Kumar Avadhanam, Prof. R. K. Mishra

Abstract


Public sector enterprises were seen as white elephants and cash cows during the 1960s, 70s and 80s. There are many issues that are being raised by the market and public which need to be addressed. They are in regard to profitability, liquidity, dividend pay out, large and diverse investments, obsolete technology, lesser market orientation, over- regulation and control by government; etc an attempt is being made in the paper to evaluate the performance of public enterprises by applying the technique of Economic Value Added (EVA) for the companies quoted at the Bombay Stock Exchange.  The sample consists of 46 companies quoted at the Bombay Stock Exchange over the period 1998-99 to 2008-09.  The analysis shows that for the period in between 1998-99 to 2004-05, the Companies like KRL, IBP, NTPC and RACFL for the period of 2000-01 to 2004-05, have generated positive EVA, whereas most of the other companies exhibited negative EVAs.  Further it is found that the CPSEs where able to generate positive EVA in the latter part of the study i.e. from the year 2005-06 to 2008-09. Further it is found that the Central Public Sector Enterprises (CPSEs) where able to generate positive EVA in the latter part of the study i.e. from the year 2005-06 to 2008-09.  To conclude it would be wrong to say that EVA is a panacea for all corporate problems. It has its own limitations like it is based on Book value of the assets rather than the Market value of the asset.


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ISSN : 2251-1555