Measuring value creation: VAIC and EVA

2014 ◽  
Vol 18 (1) ◽  
pp. 8-21 ◽  
Author(s):  
Gianpaolo Iazzolino ◽  
Domenico Laise ◽  
Giuseppe Migliano
Keyword(s):  
Balanced Scorecard ◽  
Economic Value ◽  
Value Added ◽  
Financial Indicators ◽  
Economic Sectors ◽  
Accounting Systems ◽  
Content Type ◽  
Evaluation Systems ◽  
Multi Criteria Evaluation ◽  
Capital Efficiency

Purpose – This study proposes a comparison between Value Added Intellectual Coefficient (VAIC) and one of the most important performance evaluation methods, the Economic Value Added (EVA), starting from a re-interpretation of the VAIC. Design/methodology/approach – The empirical data were gathered from AMADEUS Bureau van Dijk and consist of 2,596 companies operating in Northern Italy, from six different economic sectors, observed for the year 2011. A correlation analysis was carried out in order to highlight whether there is a relationship between the two concepts of VAIC and EVA. Findings – Results show that EVA and VAIC have no significant relationships; as a matter of fact, EVA is based on financial theory, whereas VAIC is focalised on the assessment of Intellectual Capital Efficiency (ICE). Practical implications – Managers could be misled due to the fact that they often make decisions by taking into account only financial indicators such as EBIT, EVA, etc. Although methods like EVA have improved modern accounting systems, they do not take into account information linked to ICE. Therefore, these two perspectives can be useful in a context in which firms' performances are measured through multi-criteria methodologies (i.e. Balanced scorecard). Originality/value – The proposal describes the differences between VAIC and EVA considering these two concepts as not contrasting. In fact, in order to better measure firms' performances, it could be useful to consider VAIC and EVA as an integrated vision in order to develop multi-criteria evaluation systems, rather than consider them separately.

Performance measurement and metrics in supply chains: an exploratory study

2015 ◽  
Vol 64 (8) ◽  
pp. 1068-1091 ◽  
Author(s):  
Wojciech Piotrowicz ◽  
Richard Cuthbertson
Keyword(s):  
Performance Management ◽  
Customer Service ◽  
Balanced Scorecard ◽  
Economic Value ◽  
Empirical Work ◽  
Health And Safety ◽  
Value Added ◽  
Small Sample ◽  
Content Type ◽  
The Balanced Scorecard

Purpose – The purpose of this paper is to explore the approaches and metrics used to measure supply chain (SC) performance, and to understand the relative perceived importance of such measures. Design/methodology/approach – This research is based on empirical data captured through a survey of SC professionals in a variety of business sectors. Findings – The research confirms the importance of the balanced scorecard (BSC) approach, with BSC, SCOR and economic value added being the most commonly used tools. Economic metrics dominate, focused on cost and customer service. While social and environmental-related measures are of emerging importance, they appear to be of similar importance to economic metrics only when backed up by a legal obligation. Research limitations/implications – The small sample of 51 companies was based on access and the group is not wholly representative of all businesses. Respondents were mainly managers from EU countries involved in procurement, logistics and transport activities. Surveyed companies included manufacturing, automotive, retail, logistics services and wholesaling businesses. Practical implications – The common key performance indicators (KPI’s) are identified. These include measures related to: quality, efficiency, responsiveness, health and safety, employees, emission, natural resources utilisation, waste and recycling. Issues that influence the usage of measurement systems as well as the company and SC levels are ranked. Social implications – Implementation of a monitoring system and subsequent usage of the collected data may help to reduce negative external impacts on society and the environment. Originality/value – The field of SC performance management is still developing, with growing empirical work. Nevertheless this paper is one of the first attempts to carry out such an analysis focused on metrics and their usage. The survey instrument has been tested and can now be applied to other contexts.

Enterprise Performance Analysis of the Selected Service Sector by Applying Modern Methods with an Emphasis on the Creation and Application of the Modified Creditworthy Model (MCWM)

2018 ◽  
Vol 9 (17) ◽  
Author(s):  
Erika Onuferová ◽  
Veronika Čabinová
Keyword(s):  
Service Sector ◽  
Prediction Models ◽  
Economic Value ◽  
Value Added ◽  
Financial Indicators ◽  
Tourism Sector ◽  
Future Success ◽  
Financial Growth ◽  
Net Assets ◽  
Third Dimension

The aim of presented paper was to create and subsequently apply the Modified 3D Creditworthy Model (MCWM) of performance reflecting sectoral characteristics and financial specificities of the selected sample of Slovak tour operators over the years 2013 – 2017. The intention of this research study was to implement the key financial indicators and appropriate prediction models into both dimensions of the traditional 2D Creditworthy Model of performance and to supplement its third dimension applying the selected modern assessment methods – the Economic Value Added and the Return On Net Assets as we consider them to be one of the most important indicators of future success and company's financial growth. This modification will help to better identify the current financial position of tour operators and more accurately identify causes that hinder the development of financial performance of the selected sample of enterprises. However, after adjusting the upper and lower quartile averages of a particular industry, this methodology is applicable in the wider context of enterprises, not only those operating in the tourism sector.

The Effect of Application of Management Accounting To Performance through Strategy

2017 ◽  
Vol 2 (4) ◽  
pp. 12-20
Author(s):  
Ali Muktiyanto
Keyword(s):  
Higher Education ◽  
Balanced Scorecard ◽  
Structural Equation ◽  
Management Accounting ◽  
Measurement Techniques ◽  
Economic Value ◽  
Value Added ◽  
Equation Modeling ◽  
Activity Based Costing ◽  
Study Program

Objective - The context strategy as process and strategy as content have significant impact to the correlation between strategy and management accounting (Muktiyanto, 2016; Parnell, 2010). In the context strategy as process, this paper aims to investigate the role of management accounting to performance through the choice of strategy. Methodology/Technique - The method by structural equation modeling on 70 (seventy) of undergraduate Accounting Study Program (composition: 70% Private Universities and 30% Public Universities). Opposite with Henry (2006) and Widener (2007) and support with Speklé and Verbeeten (2014) and Acquaah (2013). Findings - This paper shown that the accounting management directly influence the performance, but not mediated by strategy. The practice of budgetary slack, the implementation of modern accounting such as activity-based costing and target costing, the use of performance measurement techniques such as the balanced scorecard, measurements based performance, and the economic value added, as well as integrated information system is an important factor in improving the performance of Higher Education. Unfortunately, the choice of strategy moderate or "stuck in the middle" has not been able to improve the performance of Higher Education directly nor as a mediating between management accounting and performance. However, in the context strategy as process, management accounting have positive influence to the strategic choice. Novelty - The effort of Higher Education to improve the performance is choose a single strategy or focus on the prospector's strategy. Type of Paper: Empirical Keywords: Management Accounting, Strategy, Performance, Indonesia. JEL Classification: M40, M41

Institutional contradiction and BSC implementation: comparative organizational analysis

2019 ◽  
Vol 27 (3) ◽  
pp. 414-440 ◽  
Author(s):  
Nizar Mohammad Alsharari ◽  
Riyad Eid ◽  
Ali Assiri
Keyword(s):  
Balanced Scorecard ◽  
Relevant Literature ◽  
Implementation Process ◽  
Successful Implementation ◽  
Organizational Analysis ◽  
Accounting Systems ◽  
Content Type ◽  
The Balanced Scorecard ◽  
Exploratory Investigation ◽  
Dialectical Perspective

Purpose This paper aims to explain institutional contradictions in the balanced scorecard (BSC) implementation process between organizations, which successfully implemented BSC. The purpose of this paper is to identify a comprehensive set of potential determinants influencing the successful implementation of BSC. Design/methodology/approach This study is an exploratory investigation into the BSC implementation based on a dialectical perspective. It uses the triangulation of data collection including interviews, documents and surveys. This also includes a comprehensive scrutiny of the relevant literature; a comprehensive analysis of case studies of BSC implementations in four organizations; and interviews and documents evidences that have already implemented or are in the process of implementing BSC. Findings The BSC was successfully implemented in the organizations, when the accounting systems introduced in these organization had already been institutionalized, that is, accepted and used on day-to-day basis. The dialectical perspective postulates that for change to become institutionalized in the organization, it needs to overcome the problem of embedded agency. This process of change is possible due to the accumulation of institutional contradiction that enables human praxis to introduce change (Seo and Creed, 2002). Research limitations/implications There is a need to empirically test and refine the proposed factors and explore relationships among the various variables by collecting data from organizations that have already implemented BSC. Practical implications The findings of this study are important and relevant to all the different-sized organizations in the different sectors and industries. This study also makes a significant contribution to society in general. Originality/value This paper contributes to the literature on organizational and accounting change that emphasis the crucial role that institutional contradiction plays in the process of BSC implementation. The findings of this study will help management in making crucial decisions and in resource allocations that are required to make the BSC implementation a success.

scholarly journals Evaluating Business Performance and Efficiency in the Medical Tourism: A Multi-criteria Approach

2021 ◽  
Vol 12 (22) ◽  
pp. 198-221
Author(s):  
Veronika Čabinová ◽  
Peter Gallo ◽  
Petra Pártlová ◽  
Jan Dobrovic ◽  
Milan Stoch
Keyword(s):  
Business Performance ◽  
Medical Tourism ◽  
Rating Scale ◽  
Economic Value ◽  
Value Added ◽  
Three Dimensions ◽  
Financial Situation ◽  
Multi Criteria Evaluation ◽  
Management Concepts ◽  
Tourism Enterprises

Measuring the performance and efficiency of the tourism enterprises is essential regarding the current pandemic situation. In such a context, improving their financial situation and competitive position also depend on the use of innovative multi-criteria evaluation models. The paper's main objective is to propose the newly designed Performance & Efficiency model (P&E model) for Slovak spa enterprises. Its structure consists of three dimensions – P&E_I, P&E_II, P&E_III. The application of Confirmatory Factor Analysis validates 34 key performance ratios reflecting the financial situation of enterprises within the P&E_I. In case of P&E_II, the development of value-added dynamics is measured by using the Economic Value Added Momentum. Using the Data Envelopment Analysis, the level of enterprise efficiency is quantified (P&E_III). The partial results of the dimensions are transformed using min-max normalization to the overall score ranging from 0 to 3. Based on the results, a rating scale of all enterprises is carried out, and both their partial and overall positions are assessed through benchmarking. During the research (2013 – 2018), the best results are achieved for SE03 (Spa Bojnice, Inc.), SE21 (Specialised Spa Institute Marína, s.e.), and SE18 (Spa Horný Smokovec, Ltd.). The worst-rated spa enterprises include SE14 (Natural Iodine Spa Číž, Inc.), SE09 (Spa Sliač, Inc.), and SE19 (Pieniny Resort, Ltd.). The proposed P&E model is easily applicable to other tourism enterprises. The research as carried out enables deepening of knowledge concerning the multi-criteria evaluation and management concepts and helps enterprises overcome current unfavorable situations.

Intellectual capital and firm performance in emerging economies: the case of India

2016 ◽  
Vol 26 (3) ◽  
pp. 410-430 ◽  
Author(s):  
Santi Gopal Maji ◽  
Mitra Goswami
Keyword(s):  
Firm Performance ◽  
Intellectual Capital ◽  
Value Added ◽  
Relative Importance ◽  
Content Type ◽  
Knowledge Based ◽  
Traditional Sector ◽  
Steel Sector ◽  
Capital Efficiency ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of intellectual capital (IC) on Indian traditional sector and compare the relative importance of IC on corporate performance of Indian knowledge-based sector (engineering sector) and traditional sector (steel sector). Design/methodology/approach Secondary data on 100 listed Indian firms, comprising of 44 firms from the engineering sector and 56 from the steel sector, are collected from “Capitaline Plus” Corporate database for a period of 14 years from 1999-2000 to 2012-2013. IC and its components are computed using Pulic’s value-added intellectual coefficient model and firm performance is measured by return on asset. Fixed effect regression model is used to investigate the hypothetical relationship between IC and firm performance. Further, quantile regression is used to check the robustness of the results. Findings The results indicate that IC efficiency and physical capital efficiency are positively and significantly associated with the firm performance for both the sectors. Regarding the components of IC, the coefficient of human capital efficiency is positive and significant, but the present effort fails to disentangle any significant influence of structural capital efficiency on firm performance. However, the results indicate that the influence of IC efficiency on firm performance is significantly greater in case of knowledge-based sector than that of traditional sector. Practical implications The findings of the study are useful for the decision makers, as the results indicate that the IC plays crucial role in value creation not only for knowledge-based firms but also for the firms belonging to the traditional manufacturing sector. Originality/value In the Indian context, this is the first study to examine the relative importance of IC in a knowledge-based sector and a traditional sector using appropriate methodology.

scholarly journals Liquidity and the Performance of the Nigerian Manufacturing Firms: an Economic Value-added Approach

2021 ◽  
Vol 17 ◽  
pp. 47-55
Author(s):  
Olusegun Osho ◽  
Alexander Ehimare Omankhanlen ◽  
Mojisola Fasanmi ◽  
Victoria Akinjare
Keyword(s):  
Manufacturing Industry ◽  
Economic Value ◽  
Value Added ◽  
Economic Value Added ◽  
Economic Sectors ◽  
Manufacturing Firm ◽  
Development Indicators ◽  
And Performance ◽  
The Impact

Considering the possibility of finding a gap and a room for improvement, so much have been written about liquidity and performance. Notwithstanding, the emphasis has been on profitability as a yardstick for performance and little has been done on other areas of performance measurement. The emphasis has also been more on various economic sectors with the exception of the manufacturing industry. This paper intends to look at the impact, if any, of liquidity provision and availability on Nigeria’s manufacturing firm’s performance from the perspective of Economic Value Added (EVA). Economic value-adding is beyond just profitability or liquidity. The firm's value to the stakeholders, its sustainability and long-term values are defined. The study would apply liquidity theories, profitability and the economic value-added theories as it applies to a manufacturing firm in a developing economy like Nigeria. On its methodology, the article data is obtained from the World Bank’s World Development Indicators-WDI and then a regression analysis will be run on the data using the SPSS software and then an analysis of the results of the regression. The last section of the article would conclude and make recommendations from the study outcome and the empirical analysis with respect to the theories.

Firm and country characteristics related to cumulative contribution to society

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Carlos Serrano-Cinca ◽  
Beatriz Cuéllar-Fernández ◽  
Yolanda Fuertes-Callén
Keyword(s):  
Empirical Study ◽  
Financial Performance ◽  
Business Models ◽  
Positive Contribution ◽  
Financial Indicators ◽  
Socially Responsible ◽  
Accounting Systems ◽  
Content Type ◽  
Country Characteristics ◽  
A Company

Purpose Many indicators attempt to measure the social performance of a company from different perspectives. Grounded in stakeholder theory, this paper aims to propose capitalising the economic value distributed annually to society over a period of time, hereafter called a firm’s cumulative contribution to society (CCS). This can be done by including everything that stakeholders value; for example, payments of taxes, remuneration of employees, payments to suppliers and creditors, donations, dividends, research and development expenses and efforts to improve the environment. Design/methodology/approach First, this paper makes a methodological proposal about how to calculate the CCS and discusses potentials and shortcomings. Then, a set of hypotheses are formulated about the firm characteristics and country attributes that make the most positive contribution to society such as business models, financial performance, a country’s human development, income equality and the extent of its shadow economy. The authors also argue that a company that originally contributes to society will continue to do so because of the structural inertia faced by organisations. The hypotheses were validated with an empirical study conducted with a sample of 9,276 new-born European companies. Findings The most significant contributors to society are large, profitable companies, which are leveraged but solvent, with high asset turnover and high-profit margins and which are productive and pay high wages. Unfortunately, this win-win situation describes a small percentage of the explained variance, which can explain why social and financial performance sometimes do not go hand-in-hand. The paper identifies features of other types of companies that contribute to society, suggesting criteria for socially responsible investors. Country development favours the cumulative contribution that firms make to society. Research limitations/implications Most accounting systems do not collect all the information necessary to calculate a refined version of the indicator such as percentage of purchases from local suppliers, percentage of salaries for executives and disabled employees and percentage of financing from socially responsible financial entities. The authors encourage modification of the accounting systems to include those aspects. Practical implications This paper identifies several types of companies that contribute the most to society from a modest set of financial indicators. Socially responsible investors can estimate their contribution to society, devising new investment criteria. Social implications The paper identifies several types of companies that contribute the most to society from a modest set of financial indicators. Socially responsible investors can estimate their contribution to society, devising new investment criteria. Originality/value The paper makes two contributions, one methodological and the other empirical. By applying a financial methodology, the authors propose to capitalise the contributions of a company over a period of time. The empirical study identifies both firm and country characteristics that explain CCS.

Do banks accumulate a higher level of intellectual capital? Evidence from an emerging market

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ngoc Phu Tran ◽  
Duc Hong Vo
Keyword(s):  
Intellectual Capital ◽  
Emerging Market ◽  
Generalized Method Of Moments ◽  
Value Added ◽  
Relational Capital ◽  
Content Type ◽  
Financial Firms ◽  
Structural Capital ◽  
Capital Efficiency ◽  
Nonfinancial Firms

PurposeIn developed countries, banks are perceived to accumulate a higher level of intellectual capital than firms in other sectors. However, this perception has not been considered or tested in the context of an emerging market such as Vietnam, which has one of the most dynamic economies in the Asian region. This study estimates and compares the level of accumulation of intellectual capital and its four components by financial and nonfinancial firms in Vietnam. Furthermore, this study examines the relationship between intellectual capital and its components and the performance of financial and nonfinancial firms.Design/methodology/approachThis study uses data collected from the annual reports of 75 financial and 75 nonfinancial firms in Vietnam from 2011 to 2018. A modified value-added intellectual coefficient model is adopted to measure the level of intellectual capital at firms. Various aspects of intellectual capital are considered, including the efficiency of human capital, structural capital, capital employed and relational capital. In addition, the generalized method of moments is used to ensure the robustness of the findings.FindingsFindings in this study indicate that financial firms in Vietnam have accumulated a higher level of intellectual capital than nonfinancial firms. In addition, intellectual capital contributes positively to financial firms' performance. Three components of intellectual capital – structural capital efficiency, capital employed efficiency and relational capital efficiency – positively affect performance by financial firms.Research limitations/implicationsThis study is limited to financial and nonfinancial firms in Vietnam. Empirical studies in the future should incorporate the efficiency aspects of these types of firms because different industries might have different characteristics, in particular, their current efficiency level, which might cause differences in relation to the accumulation of intellectual capital.Practical implicationsThe findings of this study provide valuable evidence and implications for executives and policymakers in creating, managing and enhancing intellectual capital within the Vietnamese context, in particular in the financial sector.Originality/valueTo the best of our knowledge, this is the first empirical study conducted in the context of Vietnam, with the following two objectives: (1) to measure and compare the level of accumulation of intellectual capital by financial and nonfinancial firms in Vietnam; and (2) to examine the contribution of intellectual capital and its components to the performance by financial and nonfinancial firms in Vietnam.

Value creation of EVA and traditional accounting measures: Indian evidence

2016 ◽  
Vol 65 (4) ◽  
pp. 436-459 ◽  
Author(s):  
Vijay Kumar Gupta ◽  
Ekta Sikarwar
Keyword(s):  
Stock Returns ◽  
Information Content ◽  
Performance Measures ◽  
Value Creation ◽  
Economic Value ◽  
Value Added ◽  
Performance Measure ◽  
Content Type ◽  
Financial Measures ◽  
Incremental Information

Purpose – The purpose of this paper is to examine the superiority of economic value added (EVA) over the traditional accounting performance measures, i.e. earnings per share, return on assets and return on equity. For this purpose, the relative and incremental information content of EVA and accounting measures are tested by examining the relationship of these measures with stock returns. Design/methodology/approach – The analysis is performed for a sample of 50 Indian companies selected from the index Nifty 50 for the period of 2008-2011. The penal regression models are applied to examine the relative and incremental information content of EVA and traditional performance measures. Findings – The study finds that EVA has more relevant and incremental information content than accounting measures for analyzing shareholder value creation. These results confirm that EVA is better performance measure than traditional accounting measures. Research limitations/implications – The study could be further extended for the sample of other firms covering the specific industries and sectors. The calculation of EVA could be modified with respect to the adjustment in profit after tax and the calculation of cost of capital. Practical implications – The study has implications for the managers who are responsible to generate the wealth of shareholders by formulating the corporate financial policies. The findings also help investors who are closely concerned with the financial health of the firm while taking their investment decisions. Originality/value – The novelty of this study is that it relates total return of firm’s stock with the financial measures unlike the previous literature.

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