IESE Research Papers,
IESE Business School

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. It was not as good as 2003, however, when their value creation reached slightly over €160,000 million. The companies that created most value for their shareholders were Enel (€13,364 million), ENI (11,855) and TIM (9,891). The companies that destroyed most value were Nokia (-€15,239 million), L'Oréal (-9,095) and Philips (-7,823). In 2004, the Euro Stoxx 50 was much more volatile than either the S&P 500 or the Dow Jones. Shareholder value destruction in the three-year period 2002-2004 was €-0.9 trillion. The market value of the companies included in the Euro Stoxx 50 was €1.5 trillion in 2004 and €1.4 trillion 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 that 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; required return to equity

JEL-codes: G12; G31; M21

24 pages, February 28, 2005

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