The concept of market value in thin markets and its implications for international accounting rules (IFRS)

2019 ◽  
Vol 37 (3) ◽  
pp. 301-310 ◽  
Author(s):  
Hans Lind ◽  
Bo Nordlund
Keyword(s):  
Balance Sheet ◽  
Market Value ◽  
Reservation Price ◽  
Content Type ◽  
Current Accounting ◽  
Thin Markets ◽  
Thin Market ◽  
Reservation Prices ◽  
Accounting Rules ◽  
Conceptual Paper

Purpose The purpose of this paper is to discuss how the concepts market value (MV) and exit price should be interpreted in thin markets and how accounting rules may need to change to take this into account. Design/methodology/approach This is a conceptual paper using hypothetical examples as a base for the conclusions. Findings In a thin market, actors can have rather different reservation prices. The price will then be set through bargaining and the agreed price could be considerable above the reservation price of the actor with the second highest reservation price. The exit price should then be below what the MV was before the transaction and below the entry price, and according to the current accounting rules, the value in the balance sheet should then be below the price paid. The authors’ experience is, however, that this rarely happens in practice. Research limitations/implications The limitation of the paper is that it is a conceptual paper and not based a systematic empirical study of accounting practices. Practical implications The results of the paper indicate that there is a need to revise the current accounting rules. Possible changes are discussed. Originality/value As far as the authors know, this is the first paper that looks at problems in the current value concepts related to differences in reservation prices in thin markets.

Management fee base: financing and investment decisions

2015 ◽  
Vol 8 (1) ◽  
pp. 46-65
Author(s):  
Pierpaolo Pattitoni ◽  
Barbara Petracci ◽  
Valerio Potì ◽  
Massimo Spisni
Keyword(s):  
Real Estate ◽  
Mutual Fund ◽  
Negative Impact ◽  
Balance Sheet ◽  
Market Value ◽  
Relative Effect ◽  
Content Type ◽  
Management Fees ◽  
Performance Fees ◽  
Asset Value

Purpose – The aim of this paper is to focus on different compensation structures for real estate mutual fund Management Companies and assess whether management fees paid on either Net Asset Value (NAV) or Gross Asset Value (GAV) generate distorted incentives relative to those generated by performance fees paid on the market value of the fund. Design/methodology/approach – To test whether management fees induce Management Companies to opportunistic behaviors, the relative effect of NAV- and GAV-based fees is compared over time using a plethora of econometric models. Findings – It is found that Management Companies that are paid GAV-based fees start with higher leverage to expand assets under management, then, subsequently, drive leverage and over-investment down as fund maturity approaches to minimize the negative impact of negative NPV investments on the final market value of the fund and therefore on performance fees paid at maturity. Research limitations/implications – A dataset of Italian listed real estate mutual funds is used. While the Italian market can be considered an ideal setting for an empirical analysis, studies on other countries would make it possible to test implications of the model that are only weakly identified in our setting. Practical implications – Results could be important when designing managerial contracts. Originality/value – It is shown that Management Companies actively manage the size of their balance sheet to maximize fees, and that NAV-based fees produce effects similar to market-based fees in terms of managerial incentives.

Shadow prices for intangible resources

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Elena Shakina ◽  
Iuliia Naidenova ◽  
Angel Barajas
Keyword(s):  
Performance Management ◽  
Management Practices ◽  
Balance Sheet ◽  
Market Value ◽  
Capital Budgeting ◽  
Hedonic Pricing ◽  
Shadow Prices ◽  
Positive Contribution ◽  
Content Type ◽  
Intangible Resources

PurposeFocusing on managerial problems related to the measurement of intangibles, this paper develops and validates a hedonic-pricing methodology for the evaluation of the intangible resources of companies obtaining their shadow prices.Design/methodology/approachThe paper adapts a hedonic-pricing methodology developed primarily for markets in real estate and secondhand cars to define how much intangibles may contribute to companies' market value. A certain calibration of the original tool has been developed to make this methodology appropriate for interpretation and practical use. The main advantage of this approach is that it allows for an evaluation of the shadow prices of intangible resources. These prices can be interpreted as the market value of the intangible resources which are not reflected on the balance sheet.FindingsThe results of this study demonstrate that hedonic pricing with a self-selection correction generates robust estimates. As one can see, the positive contribution of a high endowment of intangibles for all shadow prices is confirmed through estimations using two different techniques. Meanwhile, the negative effect of a low endowment is even more evident for the baseline model. This model shows consistent negative shadow prices for the majority of underinvested intangibles. Brands have the highest shadow prices in the introduced models; human capital, as measured by the qualification of top management and investments in employees, has likewise demonstrated high prices. However, most structural resources seem to be not reflected to a large degree in companies' market value.Practical implicationsThis paper brings new opportunities to obtain the monetary value of intangible resources based on estimated market prices of a corporation's resource portfolio. These prices may be used for several purposes – for example, benchmarking for performance management, capital budgeting or knowledge-management practices. Moreover, by having methodological value, this study opens ways to evaluate any other intangibles which are not explicitly discussed in the empirical test of this particular study.Originality/valueThis study primarily contributes to the methodological advancement of evaluation of corporate intangible resources. It departs from the conventional hedonic-pricing mechanism to identify cogent estimates to intangibles in monetary terms. Importantly, this mechanism implies individual shadow prices for specific intangible resources which makes the contribution of this study unique for the existing literature, both within resource-based and value-based views.

Accounting for sustainable finance: Does fair value measurement fit for long-term equity investments?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Vera Palea
Keyword(s):  
Sustainable Development ◽  
Literature Review ◽  
Fair Value ◽  
Fair Value Accounting ◽  
Content Type ◽  
Current Accounting ◽  
Sustainability Criteria ◽  
Accounting Rules ◽  
Equity Investments

Purpose The purpose of this paper is to discuss whether fair value accounting fits for long-term equity investments, which are considered key to retool economies according to sustainability criteria. In doing so, the paper focuses on the European Union and addresses the European Commission’s (2018a) concern that current accounting rules are unfit for achieving the United Nations Sustainable Development goals and the targets of the Paris Agreement on climate change. Design/methodology/approach The paper grounds in a wide literature review on the effects of fair value accounting on investors’ asset allocation strategies. By critically integrating literature on the notion of long-term investment with theories and possible accounting approaches, the paper provides implications for a revision of the current measurement system for long-term equity investments. Findings The literature review supports the view that fair value accounting has played a role in discouraging equity investments over time, thus leaving economies with poorer risk-sharing and weaker long-term investments. The paper contributes to the debate on alternative measurement systems by suggesting possible solutions in relation to controversies arising from empirical evidence. Originality/value Reorienting economies according to sustainability criteria represents an urgent issue which requires prompt and policy-oriented responses. Accordingly, this paper offers insights and guidelines that can help policymakers revise current accounting rules for long-term equity investments in line with sustainable development objectives.

Developing ASEAN India partnership for fostering technology development

2015 ◽  
Vol 7 (2) ◽  
pp. 205-218
Author(s):  
Sunil Sahadev ◽  
Pongsak Hoontrakul
Keyword(s):  
Technological Innovation ◽  
Policy Development ◽  
Technology Development ◽  
Trade Flow ◽  
Secondary Data ◽  
Trade Agreement ◽  
Content Type ◽  
Conceptual Paper ◽  
Broad Policy ◽  
Practical Implications

Purpose – This conceptual paper aims to discuss issues relevant to fostering cooperation between India and countries in the ASEAN region in the area of technological innovation. Design/methodology/approach – This is a conceptual paper, based on insights from the existing body of literature and secondary data. Findings – The study looks at the competitiveness of different countries in the ASEAN region and considers their technological competitiveness vis-à-vis India. Broad policy issues related to fostering technological innovation as well as the main advantages of such collaboration are discussed. Research limitations/implications – This is a conceptual paper mainly intended for discussion. Practical implications – The paper provides guidelines for fostering technological innovation and could, therefore, help policy development. Originality/value – Although the Indo-ASEAN free-trade agreement is helping trade flow between the countries in the region, the potential for technological collaborations still lies unutilised. This paper looks at the possibilities for such collaborations and is one of the few papers that consider this line of thinking.

scholarly journals Millennial cultural consumers: co-creating value through brand communities

2014 ◽  
Vol 4 (1/2) ◽  
pp. 119-135 ◽  
Author(s):  
Sue Vaux Halliday ◽  
Alexandra Astafyeva
Keyword(s):  
Design Methodology ◽  
Knowledge Development ◽  
Brand Community ◽  
Content Type ◽  
Brand Communities ◽  
Art And Culture ◽  
Managerial Implications ◽  
Community Theory ◽  
Conceptual Paper ◽  
Research Propositions

Purpose – The purpose of this paper is to conceptualise millennial cultural consumers (MCCs) to bring together strands of consumer theory with branding theory to consider how to attract and retain younger audiences in arts organisations. Within that the authors single out for attention how “brand community” theory might apply to MCCs. Design/methodology/approach – This paper is a conceptual paper that reviews and comments on concepts relevant to helping arts organisations develop strategies to attract and retain younger consumers in their audiences. Findings – Thoughtful conceptual insights and four research propositions for further work by academics and/or practitioners on Millennials and the art and culture world are derived from this review and commentary. Managerial implications are also drawn out. Originality/value – This paper contributes to the knowledge development of such concepts as value and brand communities. It also provides an explanation of these concepts conncecting academic thought on value with pressing management challenges for arts organisations, suggesting ways to apply brand community thinking to innovatiely conceptualised MCCs.

Responsible innovation and social innovation: toward an integrative research framework

2019 ◽  
Vol 46 (6) ◽  
pp. 742-755 ◽  
Author(s):  
Karsten Bolz ◽  
Anne de Bruin
Keyword(s):  
Social Innovation ◽  
Field Research ◽  
Responsible Innovation ◽  
Systematic Research ◽  
Content Type ◽  
Policy Practice ◽  
Integrative Framework ◽  
Integrative Research ◽  
Conceptual Paper ◽  
Innovation Study

PurposeResponsible innovation (RI) and social innovation (SI) are two fields of innovation study experiencing burgeoning policy, practice and research interest. Despite this rapid rise in popularity, the scholarly literature in these two related areas of innovation study remains quite separate, stymieing the growth of shared research insights. The purpose of this paper is to propose a pragmatic, process-based framework that lends itself to advancing systematic research in both fields while retaining their distinct identities.Design/methodology/approachThis conceptual paper outlines an analogy-inspired framework that builds on the logical thinking put forward by Philosopher Willard Van Orman Quine in 1962. It focusses on key processes that cross-cut both fields.FindingsReflexivity, collaboration and design are identified as three broad core processes that span both the RI and SI fields and form the basis of an integrative framework that highlights the scope for cross-field research pollination.Originality/valueThe literature that draws these two fields together is virtually non-existent. The paper uses analogy to facilitate awareness of the parallels between these two areas of innovation study. The integrative framework put forward in the paper is of value for advancing cumulative research in innovation fields of critical importance to the society.

The hidden power of language

2020 ◽  
Vol 11 (1) ◽  
pp. 187-206
Author(s):  
Philipp Hummel ◽  
Jacob Hörisch
Keyword(s):  
Decision Making ◽  
Value Creation ◽  
Cost Reduction ◽  
Social Consequences ◽  
Decision Makers ◽  
Social Aspects ◽  
Social Aspect ◽  
Content Type ◽  
Current Accounting ◽  
Cost Reductions

Purpose Stakeholder theory research identifies changes in language as one possible mechanism to overcome the deficiencies of current accounting practices with regard to social aspects. This study aims to examine the effects of the terms used for specific accounts on company internal decision-making, drawing on the example of “value creation accounting”. Design/methodology/approach The study uses a survey based-experiment to analyze the effects of terms used for specific accounts on decision-making, with a focus on social aspects (in particular expenditures for staff) in cost reduction and expenditure decisions. Findings The findings indicate that wordings, which more closely relate to value creation than to costs, decrease cost reductions and increase the priority ascribed to the social aspect of reducing staff costs in times of financial shortage. The effects of terms used on cost reductions are stronger among female decision makers. Practical implications The analysis suggests that conventional accounting language best suits organizations that aim at incentivizing decision makers to primarily cut costs. By contrast, if an organization follows an approach that puts importance on social aspects in times of financial shortage and on not doing too sharp cost reductions, value creation-oriented language is the more effective approach. Social implications The study suggests that the specific terminology used for accounts should be chosen more carefully and with awareness for the possible effects on cost reduction decisions as well as on social consequences. Originality/value This study contributes to a better understanding of the relevance of language in accounting. It suggests that the terms used for accounts should be chosen purposefully because of their far-reaching potential consequences for stakeholders as well as for the organization.

scholarly journals The social marketing theory-based (SMT) approach for designing interventions

2016 ◽  
Vol 6 (1) ◽  
pp. 18-40 ◽  
Author(s):  
Shamini Manikam ◽  
Rebekah Russell-Bennett
Keyword(s):  
Social Marketing ◽  
Design Methodology ◽  
Marketing Theory ◽  
Content Type ◽  
Step Process ◽  
The Social ◽  
Conceptual Paper ◽  
Marketing Intervention ◽  
Practical Implications ◽  
Social Marketing Theory

Purpose – Despite the importance of theory as a driving framework, many social marketers either fail to explicitly use theory as the basis of designing social marketing interventions or default to familiar theories which may not accurately reflect the nature of the behavioural issue. The purpose of this paper is therefore to propose and demonstrate the social marketing theory (SMT)-based approach for designing social marketing interventions, campaigns or tools. Design/methodology/approach – This conceptual paper proposes a four-step process and illustrates this process by applying the SMT-based approach to the digital component of a social marketing intervention for preventing domestic violence. Findings – For effective social marketing interventions, the underpinning theory must reflect consumer insights and key behavioural drivers and be used explicitly in the design process. Practical implications – Social marketing practitioners do not always understand how to use theory in the design of interventions, campaigns or tools, and scholars do not always understand how to translate theories into practice. This paper outlines a process and illustrates how theory can be selected and applied. Originality/value – This paper proposes a process for theory selection and use in a social marketing context.

The IRS eyes professor's movie: a taxation case exercise

2013 ◽  
Vol 9 (2) ◽  
pp. 58-64
Author(s):  
Jayanti Bandyopadhyay ◽  
Paul F. McGee ◽  
Linda A. Hall
Keyword(s):  
Foreign Country ◽  
Attractive Alternative ◽  
Sufficient Information ◽  
Case Description ◽  
Red Flags ◽  
Content Type ◽  
Accounting Rules ◽  
The Individual ◽  
Tax Accounting

Case description This case illustrates the tax implications of a movie produced in a foreign country that resulted in a loss. Teaching opportunities include the application of tax rules to a Schedule C business loss and a resulting net operating loss (NOL) deduction, the consideration of hobby and passive activity losses, the tax treatment of funds received in a divorce settlement, and how an individual might handle a possible IRS examination. Students are asked to prepare a revised Form 1040 for the movie business loss and the individual NOL deduction based on evidence provided in the case. Sufficient information is provided in the case to identify audit “red flags” in a tax return. Using the tale of an actual movie production in a foreign country and its consequent tax implications can provide an attractive alternative to teaching tax accounting rules that are often considered by students as “dry”.

Sign in / Sign up

Export Citation Format

Share Document