Y
EPS ROE ROI R&D EVA Economic Value Added, EVA Residual Income Y Y
EVA Y Y C Y Y E C Y Y O Y E O EVA Y Y E O EVA
Abstract There are many factors, such as long-term depression and industrial moving, to induce Taiwanese corporations into financial distress since the Asian Financial Crisis erupted in 1997. In research of financial distress, it s difficult to distinguish the exact factors that whether financial aspect or other aspect cause financial distress. Management normally will take improvement actions in operation or financial respects when it perceives certain aspects getting worse. In practice, organization reforming and changing top management team may be the most popular and effective solutions. But, the effects for adopting such actions are uncertain. Therefore, those financial-distress corporations after taking successful improvements in change management are worth the research of its improvement procedures and methodologies. Many researchers evaluate corporation performance using certain financial ratio such as earnings per share (EPS), return on equity (ROE), and return on investment (ROI). According to the earning calculation as required in Generally Accepted Accounting Principle (GAAP), some expenditures which will make corporation benefit from a long-term respect are expensed currently. This result may understate current period and overstate future period earning and assets. Management may reduce this kind of expenditures when EPS is the only indicator for performance evaluation. Economic Value Added (EVA), one valuation method based upon residual income, will improve above-mentioned shortcomings of traditional performance evaluation. The major concept of EVA is that adjustment of accounting accounts is necessary to get real value of corporation and corporation needs to earn profit exceeding return of costs of capital to create value of shareholder. The case in my research, Y company, expanded its investment in Compact Integrated Steel Mill project which was announced in 1992. However, after Asian Financial Crisis in 1997, Y company s operation was getting worse and was unable to repay its bank loans. Y company then became a financial-distress corporation. The top management was changed after the majority shareholdings of Y company were transferred to C company. Since ownership change, Y company made organization reforming with Theory E first and Theory O second. We adopt EVA as the vehicle to assess the performance of new management s improvement. In our research, EVA of Y company was turnaround after C company s acquisition of Y company s shareholdings and its top management was totally changed. Keywords: Financial distress, Change management, Theory E, Theory O, Economic Value Added, EVA, Residual income.
4 4 8 9 10 10 14 23 23 24 25 26 26 34 37 43 44 52 57 57 58 2
4 1 4 2 4 3 4 4 4 5 4 6 4 7 4 8 4 9 Y 85 92 39 Y 85 92 40 Y 85 92 41 Y 85 92 42 Y EVA 47 Y EVA 48 Y EVA 49 Y EVA 50 Y EVA 51 3
4
(Wruck and Karen,1990) (Bowman, Edward and Singh, 1993) (John, Kose, Lang and Netter, 1992) (Pfeffer and Davis-Blake, 1986) (John, Kose, Lang and Netter,1992) (Smith, Clifford and Warner, 1979 DeAngelo and DeAngelo,1990) Hambrick & Mason 1984 Upper Echelons theory 5
EPS ROE ROI R&D Residual Income Stern Stewart & Co. 1991 Economic Value Added, EVA EVA Residual Income RI 6
EVA weighted average cost of capital WACC return on invested capital ROIC WACC EVA Sony Coca Cola AT&T CSX Briggs & Stratton (Tully, 1993 & Lowenstein,1997) Y Y 7
1. EVA 2. (NOPAT) (Invested Capital) (WACC) (Equity Equivalents) EVA 3. EVA 8
EVA EVA EVA EVA 9
Beaver 1966 Deakin 1972 Beaver 1983 10
Lau 1987 0 4 40% Lau Warner, Watts, and Wruck(1988) Gilson and Stuart(1989) Michael and Nitin (2000) E O E O 11
Jack Welch Archie Norman ASDA E O Richard, Mark and Linda(1997) US Army, Royal Dutch/Shell Group Sears, Roebuck & Company 12
Donald (2003) 13
EVA 1777 Hamilton Marshall 1890 Solomons 1965 Residual Income 1991 Stern Stewart & Co Economic Value Added EVA Stern Stewart & Co EVA EVA Net Operating Profit After Taxes, NOPAT EVA EVA Dodd & Chen,1997 14
> < EVA Young,1999 EVA EVA EVA NOPAT (WACC Invested Capital) (NOPAT Invested Capital)/ Invested Capital (WACC Invested Capital) (ROIC Invested Capital) (WACC Invested Capital) (ROIC WACC) Invested Capital NOPAT Net Operating Profits After Taxes Invested Capital WACC Weighted Average Cost of Capital 15
ROIC Return on Invested Capital NOPAT/ Invested Capital (NOPAT) (Capital) EVA EVA (WACC) D E WACC = (1 - t) Rd + RE D + E D + E Rd RE D E t 16
Rd L r R d L R d L r Discounted Cash Flow Method Capital Assets Pricing Model A. Gorden(1956) Gorden Growth Model Gorden 1. r = D P 17
r D P 2. D r = + g P g 3. EPS EPS r = P (g) CAPM Sharp(1964) Treynor(1961) Mossin(1966) Lintner(1965) 18
Cov( R, R ) E(R) Rf [E (Rm-Rf)], m Var( R m ) E(R) R m R f CAPM E(Rm-Rf) 1 1 EVA EVA EVA (Equity Equivalents) Stern Stewart & Co. 1 2 3 Stern Stewart & Co. 160 5-15 Stern Stewart & Co. EVA 19
1.R&D EVA R&D EVA R&D EVA 2. LIFO EVA FIFO LIFO Reserve LIFO FIFO LIFO Reserve Capital NOPAT LIFO Reserve LIFO FIFO 3. 20
EVA 4. EVA EVA Stern Stewart & Co. NOPAT 5. 40 EVA NOPAT 6. EVA 7. 21
EVA NOPAT 8. EVA NOPAT EVA NOPAT 9. EVA Stern Stewart & Co. EVA 22
EVA : EVA 3-1 23
Lau 1987 (State) 0 4 40% Lau 1997 EVA Stern Stewart & Co. 24
EVA EVA EVA 25
1997 26
1. (~ ) 2. 3. ( ~) 1. ( ) 60 ( ) 6 11.6 3 ( 1999) 2. ( ) 27
3. ( ) 4. ( ) (1999) 1. 2. 28
3. 4. 5. 811.7 395.5 9 (1999) 29
( ) Y 4,800 86% 600 200 Y 30
31 240 Y 1040 85.8 503 11.68% 1998 817.7 ( 1999) (1,040 ) 200 Y 9,320,834 10,188,305 867,471 9% 7,888,073 10,605,052 2,716,979 26% 1,338,080 69% 10% 40% 2,026,917 34% 26%
32 Y 100%( 118%) (1999) ( 30 ) (25 ) (25 ) (100 ) (60 ) (111%) (110%) ( ) Y 1997 (pegging) 7.57%
(2000) (1999) (1999) ( ) 33
34 Y Y Y Y Y Y Y 135,000 28.45
Y Y Y Y Y 1.89 1.8 2.18 Y Y 3% 54.2 2.5 Y C Y C WTO 35
36 C Y 22.5% Y C Y Y C Y 54.2 Y C Y Y Y Y 555 10 20% C Y Y Y Y Y Y Y
Y Y Y C Y Y Y C Y Y 4-1 4-2 4-3 4-4 4-1 Y 63%~70% 35 10 89 24% 18 Y Y 50 Y 4-2 Y -6.3% 3.8% 37
10 Y 4-3 Y 4-4 35 2.21 1.73 2.3 1.26 1 50 0.32 1.22 1 Y 38
4-1 Y 85 92 85 86 87 88 89 90 91 92 176,087 412,543 440,299 251,014 930,684 447,372 511,635 764,350 306,795 229,336 37,776 124,848 40,630 116,424 122,427 403,183 ( ) 749,845 1,351,922 784,409 1,143,518 1,230,219 973,184 419,613 411,473 2,644,004 3,073,854 2,558,447 2,553,617 2,915,085 1,949,575 3,728,955 4,049,213 4,684,384 5,027,668 5,449,665 5,733,553 5,746,354 -( ) - - 11,036,771 10,569,429 9,091,792 11,261,286 11,769,341 4,832,367 5,886,115 6,346,352 - - - - - 2,863,491 2,867,515-12,631,550 16,832,262 18,365,231 17,976,340 17,307,029 16,649,221 15,872,834 20,050,030 241,321 310,293 160,385 110,724 92,764 2,906,846 2,719,691 177,754 5,174,767 7,614,716 11,182,261 9,545,764 9,513,288 13,319,009 12,634,418 6,557,612 9,056,558 11,267,018 9,207,894 10,907,419 9,197,669 5,847,702 4,849,552 8,395,000 6,000,000 7,575,074 7,943,361 7,943,361 11,443,361 11,443,361 11,443,361 11,443,361 1,575,377 2,675,636 2,680,815 1,661,353 1,378,486-22,665-1,575,377 2,675,636 1,592,772 1,661,353 1,378,486-22,665-589,730 ( 375,439 ) ( 1,088,043) ( 283,363 ) ( 1,829,870 ) ( 2,947,526 ) ( 979,574 ) 709,681 ( ) 535,730 ( 375,439 ) - - ( 451,384 ) ( 2,947,526 ) ( 956,909 ) 709,681 22,397,007 28,841,762 29,872,714 29,966,594 29,909,614 27,854,955 28,346,357 27,489,723 14,231,325 18,881,73 20,465,447 20,642,007 18,973,858 19,412,004 17,854,636 15,332,083 8,165,682 9,960,028 9,407,267 9,324,587 10,935,756 8,442,951 10,491,721 12,157,640 39
Y 85 92 85 86 87 88 89 90 91 92 9,421,660 10,235,182 15,766,525 17,230,329 20,322,409 17,486,611 23,240,336 30,429,547 579,245 676,802 251,756 1,608,698 241,438 ( 266,733 ) 3,825,748 4,099,296 64,515 157,300 ( 378,499 ) 655,812 ( 604,391 ) ( 1,099,030 ) 3,030,049 3,013,005 83,431 48,328 71,743 77,402 87,129 85,691 18,562 11,694 ( 2) 198,108 156,799 650,665 1,122,864 1,351,678 1,239,414 847,452 499,895 603,182 1,019,048 855,029 290,476 7,114 3,483 2,183 768 431,921 ( 905,642 ) (1,081,051) ( 214,782 ) ( 1,829,374 ) ( 2,417,502 ) 1,742,952 1,905,634 ( 43,992) ( 4,496 ) ( 6,989 ) - ( 78,640 ) 225,000 ( 239,044) ( 48,660) - - ( 78,640 ) 225,000 ( 225,000) 387,929 ( 910,138 ) (1,088,040) ( 214,782 ) ( 1,829,374 ) ( 2,496,142 ) 1,967,952 1,666,590 0.72 ( 1.34 ) ( 1.37 ) ( 0.27 ) ( 1.87 ) ( 2.22 ) 1.73 1.46 40
表 4-3:Y 公司 85 至 92 年度現金流量表單位 : 新台幣千元 85 86 87 88 89 90 91 92 1,245,148 (959,518) 1,559,432 (116,799) (1,833,119) (1,170,285) 2,292,982 2,849,302 (6,717,998) (5,077,906) (2,266,879) (309,132) 359,080 (622,261) 42,245 (414,085) 5,355,685 6,273,880 735,203 236,646 2,153,709 1,309,234 (2,270,964) (2,182,502) (117,165) 236,456 27,756 (189,285) 679,670 (483,312) 64,263 252,715 41
4-4 Y 85 92 85 86 87 88 89 90 91 92 63.5 65.5 68.5 68.88 63.44 69.69 62.99 55.77 136.3 126.1 101.4 112.55 116.33 85.83 96.65 102.51 1.74 1.89 2.18 2.21 1.73 2.30 1.70 1.26 175.7 144.9 94.5 117.97 122.09 35.22 46.59 96.78 23.82 23.17 11.29 15.92 24.11 10.48 8.34 24.08 0.79 ( 0.64 ) ( 1.15 ) 0.81 ( 0.35 ) ( 0.95 ) 3.06 4.81 9.3 10.9 16.5 19.73 19.95 18.34 37.14 73.23 39 33 22 19 18 20 10 5 2.9 3.3 5.5 5.92 6.83 6.62 6.54 6.77 128 110 67 62 53 55 56 54 0.75 0.61 0.86 0.96 1.17 1.05 1.46 1.52 0.42 0.35 0.53 0.57 0.68 0.63 0.82 1.11 3.0 ( 3.09 ) ( 2.04 ) 2.10 ( 2.72 ) ( 5.42 ) 9.27 7.31 6.12 ( 10.04 ) ( 11.24 ) ( 2.29 ) ( 18.06 ) ( 25.76 ) 20.79 14.72 1.08 2.05 ( 4.76 ) 8.26 ( 5.28 ) ( 9.60 ) 26.48 26.33 (%) 7.20 ( 11.83 ) ( 13.61 ) ( 2.70 ) ( 15.99 ) ( 21.13 ) 15.23 16.65 - ( 8.89 ) ( 6.90 ) ( 1.25 ) ( 9.00 ) ( 14.27 ) 8.47 5.48 0.72 ( 1.34 ) ( 1.37 ) ( 0.27 ) ( 1.87 ) ( 2.22 ) 1.73 1.46 2.43 ( 12.87 ) 13.92 ( 1.21 ) ( 19.78 ) ( 8.96 ) 18.16 43.58 ( 15.99 ) ( 17.78 ) ( 1.49 ) 5.74 ( 1.01 ) ( 28.47 ) 12.05 55.06 6.24 ( 4.48 ) 7.36 ( 0.50 ) ( 7.99 ) ( 6.45 ) 11.35 11.01 42
Y Y Y 80% Y 50 Y C 43
Y 85 92 EVA IC Y Y 4-5 (NOPAT) Y 4-6 (WACC) 4-7 WACC Al Ehrbar The Real Key to Creating Wealth 12% 15% Y WACC 4-8 44
R&D Y 85~92 (1) (4) (5) (6) (8) Y 90 91 224,750 615,153 NOPAT IC NOPAT 4-5 4-6 C 88 Y 45
46 EVA 4-9 EVA Y Y EVA C C Y Y Y Y EVA -3,255 Y Y EVA Y Y C Y Y Y 92 Y EVA Y
4-5 Y EVA (Invested Capital) : 84 85 86 87 88 89 90 91 92 10,799,987 9,091,792 11,036,771 10,569,429 11,261,286 11,769,341 4,832,367 5,886,115 6,346,352 303,428 306,795 229,336 37,776 124,848 40,630 116,424 122,427 403,183 (1) 10,496,559 8,784,997 10,807,435 10,531,653 11,136,438 11,728,711 4,715,943 5,763,688 5,943,169 8,326,365 5,174,767 7,614,716 11,182,261 9,545,764 9,513,288 13,319,009 12,634,418 6,557,612 7,720,938 4,645,971 6,967,248 9,104,403 7,344,317 7,737,839 12,465,528 11,279,213 5,551,263 (2) 605,427 528,796 647,468 2,077,858 2,201,447 1,775,449 853,481 1,355,205 1,006,349 (3) = (1) -(2) 9,891,132 8,256,201 10,159,967 8,453,795 8,934,991 9,953,262 3,862,462 4,408,483 4,936,820 ( ) 3,529,073 3,285,454 2,948,650 18,017,079 17,737,881 17,192,055 16,584,359 15,872,834 20,035,284 - - - - - - - - 615,154 (4) ( ) 3,529,073 3,285,454 2,948,650 18,017,079 17,737,881 17,192,055 16,584,359 15,872,834 20,650,438 ( ) 193,554 241,321 310,293 160,385 110,724 92,764 5,770,337 5,587,206 177,754 - - - - - - - 224,750 - - - - - - - - 35,965 35,965 12,910 44,040 72,090 98,982 147,323 198,067 245,293 370,666 379,471 (5) 180,644 197,281 238,203 61,403 (36,599) (105,303) 5,525,044 5,477,255 (165,752) (IC) = 13,600,849 11,738,936 13,346,820 26,532,277 26,636,273 27,040,014 25,971,865 25,758,572 25,421,506 (3)+(4)+(5) 90~91 47
4-6 Y EVA (NOPAT Net Operating Profits After Tax) : 85 86 87 88 89 90 91 92 (1) ( ) 387,929 (910,138) (1,088,040) (214,782) (1,829,374) (2,496,142) 1,967,952 1,666,590 (2) 48,660 - - - - 78,640 (225,000) 225,000 (3) 198,108 156,799 650,665 1,122,864 1,351,678 1,239,414 847,452 499,895 (4) - - - - - - 35,965 - (5) ( ) - - - - - - 224,750 615,154 (6) ( ) 64,526 4,605 69,352 111,130 90,836 145,228 69,156 7,704 (7) ( ) (310,916) (298,912) 2,273 (30,974) - - (11,237) 15,167 (8) ( ) - 100,969 (77,984) 3,253 70,208 15,032 (24,393) (26,651) (9) 25% 25% 25% 25% 25% 25% 25% 25% NOPAT=(1)+(2)+(3)*(1-(9)) +(4)+(5)+(6)+(7)+(8) 338,780 (985,877) (606,400) 710,775 (654,572) (1,327,682) 2,672,782 2,877,885 48
4-7 Y EVA : 85 86 87 88 89 90 91 92 (4)=(1)+(2)+(3) 14,078,552 18,521,078 20,150,519 19,865,657 17,585,813 18,599,312 17,548,221 14,779,254 (1) 4,645,971 6,967,248 9,104,403 7,344,317 7,737,839 12,465,528 11,279,213 5,551,263 (2) 9,056,558 11,267,018 9,207,894 10,907,419 9,197,669 5,847,702 4,849,552 8,395,000 (3) 376,023 286,812 1,838,222 1,613,921 650,305 286,082 1,419,456 832,991 (5) 198,108 156,799 650,665 1,122,864 1,351,678 1,239,414 847,452 499,895 (6) 603,182 1,019,048 855,029 290,476 7,114 3,483 2,183 768 =((5)+ (6))/(4) 5.69% 6.35% 7.47% 7.11% 7.73% 6.68% 4.84% 3.39% 49
4-8 Y EVA (WACC, Weighted Average Cost of Capital) : 85 86 87 88 89 90 91 92 5.69% 6.35% 7.47% 7.11% 7.73% 6.68% 4.84% 3.39% 25% 25% 25% 25% 25% 25% 25% 25% 8,600 8,613 4,617 6,712 2,712 1,053 7,781 15,963 14,078,552 18,521,078 20,150,519 19,865,657 17,585,813 18,599,312 17,548,221 14,779,254 37.92% 31.74% 18.64% 25.25% 13.36% 5.36% 30.72% 51.93% 62.08% 68.26% 81.36% 74.75% 86.64% 94.64% 69.28% 48.07% WACC 9.22% 9.09% 8.88% 9.11% 8.70% 7.13% 7.96% 9.42% 1: 2: 15% 50
4-9 Y EVA 85 86 87 88 89 90 91 92 NOPAT(n) 338,780 (985,877) (606,400) 710,775 (654,572) (1,327,682) 2,672,782 2,877,885 WACC(a) 9.22% 9.09% 8.88% 9.11% 8.70% 7.13% 7.96% 9.42% IC(b) 13,600,849 11,738,936 13,346,820 26,532,277 26,636,273 27,040,014 25,971,865 25,758,572 EVA=(n)-(a)*(b) (915,415) (2,053,512) (1,790,999) (1,705,233) (2,971,510) (3,255,135) 604,828 452,104 51
C Y Y Y C Y 16% Y 16% Y 10 C 35 Y 2.21 1.73 Y 6% 4% 2% 52
53
4.5%( ) Y Y Y Y 100 54 4.5% 3.315% Y 91 0.47 92 0.97 1.7 1.26 91 8.5 92 5 41% Y 4 ( 30 ) C Y C Y C 54
Y Y C Y Y C C Y Y Y C Y Y Y C Y C C Y Y Y C Y Y Y C Y Y 55
C Y C 92 5 Y Y Y 240 240 Y Y KPI MIS ERP Y 91 C Y ERP C C Y C C Y C Y C 56
C Y Y Y Y C C C Y Y Y Y Y Y Y EVA Y 57
-80 Y Y EVA Y C Y 58
59 Y E C Y Y O Y E O EVA Y Y Y Y Y Y Y
Y EVA EVA Y Y EVA Y EVA MVA 60
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1. 91 2. --- 91 3. - 90 4. 91 5. - 89 6. 91 7. 88 8. 9. 90 10. EVA Excite@Home 90 11. 92 12. MVA.FCF 89 13. (EVA) 89 62