Euro Stoxx 50: 1997-2006 Shareholder Value Creation in Europe

Abstract

2006 was a good year for the shareholders of the companies in the Euro Stoxx 50. The shareholder value creation of these 50 companies was €246.1 billion. The companies that created more value for their shareholders were Santander (€16.2 billion), Endesa (€15.8 billion), Suez (€15.6 billion) and Telefonica (€14.8 billion). The companies that destroyed more value were: Sanofi Synthelabo (-€10.7 billion), Nokia (-€3.4 billion) and Telecom Italia (-€2.9 billion).

The most profitable company in 2006 was Endesa (75%).

The market value of the 50 companies included in the Euro Stoxx 50 was €2.44 trillion in 2006, although only €2.12 trillion were included in the index.

ENI was the top shareholder value creator and Deutsche Telekom the top shareholder value destroyer during the nine-year period 1997-2006.

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, shareholder value added, shareholder return, required return to equity, Euro Stoxx 50

JEL Classification: G12, G31, M21