Eurostoxx 50: 1997-2004. Shareholder Value Creation in Europe.

Abstract

2004 was a good year for the shareholders of the companies in the Euro Stoxx 50: the shareholder value creation of these 50 companies was 42,880 million euros, however, not as good as 2003 when their value creation reached a bit over 160,000 euros. The companies that created more value for their shareholder were Enel (13,364 million euros), Eni (11,855) and Tim (9,891). The companies that destroyed more value were Nokia (-15,239 million euros), L'Oreal (-9,095) and Philips (-7,823). In 2004, 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 2002-2004 was -0.9 trillion euros. The market value included in the EuroStoxx 50 of the 50 companies was 1.5 trillion euros in 2004, and 1.4 trillion euros in 2003.

We also calculate the created shareholder value of the 50 companies during the seven-year period 1997-2004. Eni was the top shareholder value creator and Vivendi 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 7.2% return in the 20 days prior to the index recomposition and a 2.3% 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