Research on Financial Strategy for Firms on the Growth Stage Based on EVA

with problems getting prominent that the domestic enterprises can not raise funds efficiently, make investment decision scientifically and allocate financial resource rationally, this paper exams the relation between financial strategy and firm value on its growth stage. The sample of this paper is drawn from firms listed on the stock exchange in Shanghai and Shenzhen; we choose 76 of top 100 firms for its growth ability on their growth stage in 2007 and compute their financial indicators from 2005 to 2007 representing financing strategy, investing strategy and dividend strategy. The empirical results show that firms with different financial strategies are different from their firm value on the growth stage: (1) the debt to asset ratio representing the financing strategy on firm growth stage is negatively related with firm value; however, the long-term debt to total debt ratio which also represents financing strategy has positive relation with the firm value; the dividend payout ratio changes negatively with the firm value. (2) The investing strategy is not related with the firm value. (3) A conservative financing and distribution strategy have a bigger positive impact on the firm value for firms on the growth stage.