Euro Stoxx 50: 1997-2005 - Shareholder Value Creation in Europe

Abstract

2005 was a very good year for the shareholders of the companies in the Euro Stoxx 50. The shareholder value creation of these 50 companies was €292.9 billion. The companies that created more value for their shareholders were Total (€30 billion), Sanofi-Synthelabo (€23.2 billion) and Eni (€20.7 billion). The companies that destroyed more value were Telecoms: Deutsche Telekom (-€14.8 billion), France Telecom (-€11.8 billion) and Telecom Italia (-€7.1 billion). In 2005, the Euro Stoxx 50 was a bit more volatile than the S&P 500.

Shareholder value creation in the three-year period 2003-2005 was €551 billion. The market value of the 50 companies included in the Euro Stoxx 50 was €2.1 trillion in 2005, although only €1.8 trillion were included in the index.

SAP was the top shareholder value creator and Deutsche Telekom the top shareholder value destroyer during the eight-year period 1997-2005.

A portfolio long in the companies that entered the index and short in the companies that abandoned the index had on average a 6.85% return in the 20 days prior to the index recomposition and a 0.97% return in the 20 days after the index recomposition.

Keywords: Shareholder value creation, created shareholder value, shareholder value added, shareholder return, required return to equity

JEL Classification: G12, G31, M21