CEVI Peaked 10 Years Ago – On a Three-Year Downward Trend
San Francisco, July 9, 2009 – The Pacific Research Institute (PRI) announced today the introduction of the California Enterprise Value Index, a measure of the enterprise value (EV) of publicly traded companies headquartered in California relative to the EV of all U.S. publicly traded companies. This is the first measure in an ongoing series. The complete report may be downloaded here.
“The Index is a barometer of the relative underperformance or overperformance of California’s economy as a result of public policies and other factors,” said Lawrence J. McQuillan, Ph.D., project director and director of Business and Economic Studies at PRI. The Index reflects relative capital-debt inflows to the state, an important determinant of future economic growth and prosperity. It also reflects the willingness of companies to headquarter in California rather than other states.
“We created the Index to help business leaders and lawmakers better understand California’s current economic climate – in particular, we hope that it would serve as a wake-up call to lawmakers. California has been steadily falling behind in economic performance relative to other states and sound policies are needed to bring a vibrant business climate back to the state.”
During the past three years, California’s total EV increased less than the nation’s in percentage terms during good years (2006–2007) and decreased more than the nation’s in percentage terms in 2008, during the market collapse. California’s share of the nation’s EV today is more than 7 percent lower than in 2005 and on a steady downward trajectory.
In 1963, the typical California public company EV was nearly 34 percent greater than the typical EV in America. Today, the typical California EV is nearly 30 percent less than America’s typical EV. California’s median EV has fallen $43.5 million in just the past two years.
Compared to the typical (in terms of EV) company in America, the typical (median) company in California has grown much more in only two sectors: energy and consumer staples. It has grown slightly in information technology and utilities, but has shrunk in six other sectors, including a sharp contraction in California’s telecommunication services sector compared to the national median.
The California Enterprise Value Index is based on data from Standard & Poor’s Compustat (www.computestat.com).