Endogenous value creation: managerial decisions on intangibles

2017 ◽  
Vol 40 (4) ◽  
pp. 410-428 ◽  
Author(s):  
Elena Shakina ◽  
Mariia Molodchik ◽  
Angel Barajas
Keyword(s):  
Value Creation ◽  
Structural Equation ◽  
Economic Value ◽  
Value Added ◽  
Public Companies ◽  
Content Type ◽  
Managerial Decisions ◽  
Top Managers ◽  
Sustainable Competitive Advantages ◽  
A Company

Purpose This study aims to explore value creation through intangibles in corporations, taking into consideration the endogenous nature of managerial decisions. It is stated that intangibles bring extra information asymmetry into a company and make managers and investors’ goals less aligned. Design/methodology/approach A theoretical model is elaborated and empirically tested on the assumption that managers, while investing in intangibles, simultaneously make a company competitive and attractive to investors. The authors use a conceptual model of endogenous value creation to test how intangibles affect outperforming of a company and provoke the expectations of investors. The research is carried out on a sample of more than 1,650 European companies covering the period from 2004 to 2011. Structural equation modelling is applied for the purposes of empirical analysis. Findings The authors reveal a diverse impact of intangibles on outperforming of a company measured by economic value added and its ability to create market value. The study discovers that managers are prone to indicate positive signals to investors rather than create sustainable competitive advantages. Practical implications This research emphasizes on the particular importance of awareness of policymakers, namely, companies’ top managers, about the outcomes of their decisions. Decision-making in public companies should involve as much deliberation as possible about the potential impact of what is decided. Originality/value This work contributes primarily to the field of corporate finance in companies that use intangibles. The endogenous process of value creation is modelled and tested. As a result, a number of essential problems in agent relationships in intangible-intensive corporations are discovered.

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.

scholarly journals Intangible-driven value creation: supporting and obstructing factors

2014 ◽  
Vol 18 (3) ◽  
pp. 87-100 ◽  
Author(s):  
Elena Shakina ◽  
Mariya Molodchik
Keyword(s):  
Value Creation ◽  
Investment Decision ◽  
Economic Value ◽  
Value Added ◽  
Market Value ◽  
Intangible Capital ◽  
Future Research ◽  
Unexpected Result ◽  
Content Type ◽  
The Impact

Purpose – This study aims to investigate the factors that support or obstruct market value creation through intangible capital. Design/methodology/approach – The paper explores the impact of intangibles and exogenous shocks on corporate attractiveness for investors measured by market value added. Specifically, the relationship between intangible-driven outperformance of companies, measured by economic value added (EVA) and a number of intangible drivers on macro-, meso- and micro-levels is analyzed. It is supposed that the process of value creation is not only confined to companies’ performances. The empirical research was conducted on > 900 public companies from Europe and the USA during the period of 2005-2009. Findings – The study establishes that investment attractiveness is affected by intangibles. It is found that a company’s experience, size and innovative focus facilitate value creation. An unexpected result was revealed concerning countries’ education level, which appears to be an obstructive condition for intangible-driven value creation. Research limitations/implications – The study reveals the significance of industry belonging for intangible-driven value creation. Nevertheless, it does not discover the particular characteristics of industry that influence corporate attractiveness for investors. These issues could be addressed in future research. Practical implications – The findings established in this study extend the understanding of the phenomenon of intangible capital and enable the improvement of investment decision-making. Originality/value – The study emphasizes the holistic framework of market value creation by analyzing a number of strategic crucial factors in line with EVA.

A theoretical and methodological framework for social economic value theory

2017 ◽  
Vol 44 (2) ◽  
pp. 169-180 ◽  
Author(s):  
Leon Monroe Miller
Keyword(s):  
Value Creation ◽  
Social Economic ◽  
Economic Value ◽  
Value Added ◽  
Theoretical Framework ◽  
Value Theory ◽  
Economic Research ◽  
Content Type ◽  
Technological Age ◽  
The Impact

Purpose The purpose of this paper is to contribute to research on the impact that the creation of value theory has on professional, organizational, and economic performance. However, a special emphasis is on explicating the theoretical foundation of the concept. Design/methodology/approach This paper is based on a hermeneutic study of the relationship between value creation and managing economic resources. The paper traces the value creation concept to its roots from the foundation of Western Civilization through the value theory of Adam Smith and up to recent technological age advancements in value theory. Findings Since its emergence the value concept has been explicated in an abundance of literature. However, there has been very little in regards to explanations detailing the theoretical underpinnings of the concept. According to John Stuart Mill, attempts to apply value theory will fail (due to misinformation or inaccurate information) without inclusiveness of the full scope of what is relevant for social science and social economic research. Research limitations/implications Although studies on organizational behavior encompass the economic aspects of research economic research tends to be narrower in scope making it difficult to verify some value claims in economic terms. This is especially true in terms of making claims in regards to the connection between economic value theory, social value theory, the Philosophy of Economics, and the Philosophy of Science. Practical implications The study introduces a theoretical framework for integrating the value added and value creation concepts as a strategy for increasing shareholder benefits, stakeholder capital, and social capital. Social implications The paper explains how the value creation concept contributes to an increase in wealth, prosperity, flourishing by drawing from a technological age approach to value creation. Originality/value The paper fills the void in the literature regarding the theoretical framework of the concept thus undergirds claims about its practical benefits by clarifying its theoretical framework.

Financial institutions mergers: a strategy choice of wealth maximisation and economic value

2020 ◽  
Vol 12 (4) ◽  
pp. 495-529
Author(s):  
Mohamad Hassan ◽  
Evangelos Giouvris
Keyword(s):  
Credit Risk ◽  
Event Study ◽  
Financial Institutions ◽  
Value Creation ◽  
Economic Value ◽  
Abnormal Returns ◽  
Study Analysis ◽  
Event Window ◽  
Content Type ◽  
Merger Announcement

Purpose This study Investigates Shareholders' value adjustment in response to financial institutions (FIs) merger announcements in the immediate event window and in the extended event window. This study also investigates accounting measures performance, comparison of post-merger to pre-merger, including several cash flow measures and not just profitability measures, as the empirical literature review suggests. Finally, the authors examine FIs mergers orientations of diversification and focus create more value for shareholders (in the immediate announcement window and several months afterward) and/or generates better cash flows, profitability and less credit risk. Design/methodology/approach This study examines FIs merger effect on bidders’ shareholder’s value and on their observed performance. This examination deploys three techniques simultaneously: a) an event study analysis, to estimate and calculate abnormal returns (ARs) and cumulative abnormal returns (CARs) in the narrow windows of the merger announcement, b) buy and hold event study analysis, to estimate ARs in the wider window of the event, +50 to +230 days after the merger announcement and c) an observed performance analysis, of financial and capital efficiency measures before and after the merger announcement; return on equity, liquidity, cost to income ratio, capital to total assets ratio, net loans to total loans, credit risk, loans to deposits ratio, other expenses and total assets, economic value addition, weighted average cost of capital and return on invested capital. Deal criteria of value, mega-deals, strategic orientation (as in Ansoff (1980) growth strategies), acquiring bank size and payment method are set as individually as control variables. Findings Results show that FIs mergers destroy share value for the bidding firms pursuing a market penetration strategy. Market development and product development strategies enable shareholders’ value creation in short and long horizons. Diversification strategies do not influence bidding shareholders’ value. Local bank to bank mergers create shareholders’ value and enhance liquidity and economic value in the short run. Bank to bank cross border mergers create value for bidders’ in the long term but are associated with high costs and higher risks. Originality/value A significant advancement over the current literature is in assessing mergers, not only for bank bidders but also for the three pillars FIs of the financial sector; banks, real-estate companies and investment companies mergers. It is an improvement over current finance literature because it deploys two different strategies in the analysis. At a univariate level, shareholder value creation and market reaction to merger announcements are examined over short (−5 or +5 days) and long (+230 days) windows of the event. Followed by regressing, the resultant CARs and BHARs over financial performance variables at the multivariate level.

The impact of intellectual capital on firm performance: a study of Indian firms listed in COSPI

2018 ◽  
Vol 19 (5) ◽  
pp. 935-964 ◽  
Author(s):  
Neha Smriti ◽  
Niladri Das
Keyword(s):  
Firm Performance ◽  
Intellectual Capital ◽  
Value Creation ◽  
Generalized Method Of Moments ◽  
Value Added ◽  
Secondary Data ◽  
Share Price ◽  
Content Type ◽  
Listed Firms ◽  
The Impact

Purpose The purpose of this paper is to examine the effect of intellectual capital (IC) on financial performance (FP) for Indian companies listed on the Centre for Monitoring Indian Economy Overall Share Price Index (COSPI). Design/methodology/approach Hypotheses were developed according to theories and literature review. Secondary data were collected from Indian companies listed on the COSPI between 2001 and 2016, and the value-added intellectual coefficient (VAIC) of Pulic (2000) was used to measure IC and its components. A dynamic system generalized method of moments (SGMM) estimator was employed to identify the variables that significantly contribute to firm performance. Findings Indian listed firms appear to be performing well and efficiently utilizing their IC. Overall, human capital had a major impact on firm productivity during the study period. Furthermore, the empirical analysis showed that structural capital efficiency and capital employed efficiency were equally important contributors to firm’s sales growth and market value. The growing importance of the contribution of IC to value creation was consistently reflected in the FP of these Indian companies. Practical implications This study has robust theoretical grounds and employs a validated methodology. The present study extends knowledge of IC among academicians and managers and highlights its contribution to value creation. The findings may help stakeholders and policymakers in developing countries properly reallocate intellectual resources. Originality/value This study is the first study to evaluate IC and its relationship with traditional measures of firm performance among Indian listed firms using dynamic SGMM and VAIC models.

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

Modelling the adoption of sustainable procurement in construction organisations

2018 ◽  
Vol 8 (5) ◽  
pp. 461-476 ◽  
Author(s):  
Kwaku Agbesi ◽  
Frank D. Fugar ◽  
Theophilus Adjei-Kumi
Keyword(s):  
Decision Process ◽  
Structural Equation ◽  
Adoption Process ◽  
Adoption Studies ◽  
Content Type ◽  
Adoption Decision ◽  
Sustainable Procurement ◽  
Top Managers ◽  
Multi Stage ◽  
Adoption Model

Purpose The adoption of sustainable procurement in construction clients’ organisation remains a difficult concept. Current research of sustainable procurement adoption studies fails to focus on a multi-stage adoption process. The purpose of this paper is to develop an organisational adoption model in a multi-stage process for the adoption of sustainable procurement in construction. Design/methodology/approach The paper developed an organisational adoption model. The model was tested against data obtained from survey administered to 193 respondents of central and local government institutions with a response rate of 63.7 per cent. Structural equation modelling using the partial least squares was employed to determine and confirm the factor structure of the model, and to measure the relationships between the model constructs. Findings An organisational adoption model is developed, tested and is robust to aid the adoption decision process of sustainable procurement within construction organisations. Research limitations/implications The study is limited in scope affecting generalisation of the results. Future study should expand the scope to include consultants, contractors and suppliers. Practical implications The adoption model will assist policy makers and top managers to understand the adoption decision process and prioritise on the technological, organisational and environmental factors that significantly affect sustainable adoption decision process within construction organisations. Originality/value This study appears to be among the first to empirically develop an organisational adoption model to aid the adoption of sustainable procurement in construction.

Using structural equation modelling to assess the sustainable competitive advantages provided by the low-cost carrier model

2018 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Vedant Singh ◽  
S. Vaibhav ◽  
Somesh Kr. Sharma
Keyword(s):  
Structural Equation Modelling ◽  
Structural Equation ◽  
Structural Equation Models ◽  
Low Cost ◽  
Future Research ◽  
Competitive Advantages ◽  
Content Type ◽  
Equation Modelling ◽  
Five Factors ◽  
Sustainable Competitive Advantages

PurposeThe purpose of this study is to examine the relationships between the dimensions of sustainable competitive advantages in the Indian low cost airlines.Design/methodology/approachThis study used structural equation modelling methods to identify the factors that significantly affect the sustainable competitive advantages enjoyed by Indian low-cost carriers (LCCs). Specifically, this study is based on the data from 208 airline experts that populate multiple structural equation models.FindingsResults indicate that indigenous efficiency, the LCCs perceptions of threat, dexterity, strategic persuasion and the LCC adopting an enabling role positively affect LCCs’ competitive advantages. These five factors were all correlated with each other. The results also show that relative to an LCC’s dexterity, indigenous efficiency is a stronger predictor of an LCC’s competitive advantages.Originality/valueThis study provides low-cost airlines with valuable information for designing effective strategies for obtaining competitive advantages in the LCC sector. To conclude the paper, the authors offer practical recommendations for managers and suggest some avenues for future research in this area.

Is property management viewed as a value-added service?

2019 ◽  
Vol 37 (2) ◽  
pp. 262-274 ◽  
Author(s):  
Dustin C. Read ◽  
Andrew Carswell
Keyword(s):  
Real Estate ◽  
Value Creation ◽  
Value Added ◽  
Professional Service ◽  
Property Management ◽  
Individual Property ◽  
Content Type ◽  
Creation Process ◽  
A Value ◽  
Value Creation Process

PurposeThe purpose of this paper is to examine the perspectives of real estate executives to assess the extent to which property management is viewed as a commodity or as a value-added professional service contributing positively to investment performance and property value maximization.Design/methodology/approachThe qualitative analysis draws on the result of 93 semi-structured interviews conducted with executives employed by some of the largest real estate investment management and service firms across the USA.FindingsThe findings suggest that significant perceptual cleavages exist in the real estate industry, with some executives believing property managers are incredibly important to the value creation process and others believing they play a much more modest role.Practical implicationsThe results highlight the need for the property management industry as whole to continue its efforts to gain recognition as a value-added professional service and for individual property management companies to actively take steps to differentiate themselves from competitors if they hope to avoid commodification and fee compression.Originality/valueThe study is the first to the authors’ knowledge to examine real estate executives’ perspectives about the roles property managers play in the value creation process, as well as their views about whether property managers have the skills and autonomy required to make value accretive decisions.

Green marketing programs as strategic initiatives in hospitality

2015 ◽  
Vol 29 (2) ◽  
pp. 81-92 ◽  
Author(s):  
Mark Scott Rosenbaum ◽  
Ipkin Anthony Wong
Keyword(s):  
Firm Value ◽  
Structural Equation ◽  
Economic Value ◽  
Green Marketing ◽  
Loyalty Programs ◽  
Equation Modeling ◽  
Content Type ◽  
The Impact ◽  
Guest Loyalty

Purpose – This paper aims to investigate a guest’s subjective appraisal of a hotel’s green marketing program, or green equity, along with value, brand and relationship equities on guest loyalty. Design/methodology/approach – Study 1 presents three models to explicate the role of a luxury hotel’s green initiatives in influencing guest loyalty. By means of structural equation modeling, one model emerges with the best fit. Study 2 examines how tourists assign economic value to a hotel’s green programs. Findings – Green equity plays a significant role in customers’ overall assessment of a hotel’s marketing programs; however, the effect is weaker when compared with the other indicators, including a hotel’s value proposition, brand image and loyalty programs. Furthermore, the results reveal that tourists are willing to pay a price premium for a hotel’s green marketing programs. Research limitations/implications – The paper links green marketing to the customer equity model and clarifies the impact of green marketing programs on loyalty and profitability. However, the study was conducted among luxury hotel guests and tourists in Macau, a leading gambling destination; thus, these customers might not have been concerned with green marketing initiatives. Practical implications – The results show that green initiatives are beneficial as long as managers include these initiatives in their overall strategic marketing programs that also promote firm value propositions, brand images and reputation. Originality/value – The paper clarifies the role of green marketing programs in hospitality and shows how hotels can benefit from enhanced guest loyalty and decreased operational expenses by implementing green initiatives.

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