Shareholder Value Creation in Europe. Eurostoxx 50: 1997-2003

Abstract

2003 was a good year for the shareholders of the companies in the Euro Stoxx 50: the shareholder value creation of these 50 companies was 150,016 million euros (E). The companies that created more value for their shareholder were Siemens (E18,778 million), Telefonica (15,382) and BSCH (12,443). The companies that destroyed more shareholder value were Nokia (-E12,051 million), L'Oreal (-8,089) and Ahold (-5,427). In 2003, the Euro Stoxx 50 was much more volatile than the S&P 500 or the Dow Jones. Shareholder value destruction in the three-year period 2001-2003 was E-1.75 trillion. The market value of the 50 companies was E1.65 trillion in 2003, and E1.4 trillion in 2002. We also calculate the created shareholder value of the 50 companies during the seven-year period 1997-2003. Siemens was the top shareholder value creator and Nokia the top shareholder value destroyer during the seven-year period. A portfolio long in the companies that entered the index and short in the companies that abandoned the index had on average a 6% return in the 20 days prior to the index recomposition and a 7% return in the 20 days after the index recomposition.

Keywords: Shareholder value creation, created shareholder value, shareholder value added, shareholder return

JEL Classification: G12, G31, M21