Non-Additivity in Accounting Valuation: Theory and Applications

Luc Paugam (), Jean-François Casta () and Hervé Stolowy ()

No 1227, HEC Research Papers Series from HEC Paris

Abstract: This paper has three objectives: (1) To introduce a theoretical solution to the issue of non-additivity between assets in place, relying on an accounting-based valuation approach; (2) To explain how such an approach can be implemented empirically by measuring synergies between assets; (3) To present the properties of this non-additive valuation technique. We use Choquet capacities, i.e., non-additive aggregation operators, to measure the interactions between assets and apply our methodology to a sample of U.S. firms from the Capital Goods industry. To operationalize our approach we examine the relationships between synergies – captured by Choquet capacities – and the market-to-book ratio (proxying for growth options), and show how interactions between assets are consistently linked to a firm’s market-to-book ratio. We also measure firm-specific productive efficiency relative to the industry and firm size. For large firms, efficiency, as defined by our approach, is positively associated with higher future operating cash flows. For small firms, efficiency is positively associated with higher future sales growth. We document that the non-additive approach appears to be better to identify expected relationships between efficiency and future performance than a simpler approach based on the market-to-book ratio.

Keywords: Goodwill; Non-additive accounting-based valuation; Synergies; Choquet capacities; Growth options; Productive efficiency (search for similar items in EconPapers)
JEL-codes: G39 M40 M41 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2017-08-01, Revised 2017-11-28
New Economics Papers: this item is included in nep-acc and nep-bec
References: Add references at CitEc
Citations:

Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3028779 Full text (application/pdf)

Related works:
Journal Article: Non‐additivity in Accounting Valuation: Theory and Applications (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1227

Access Statistics for this paper

More papers in HEC Research Papers Series from HEC Paris HEC Paris, 78351 Jouy-en-Josas cedex, France. Contact information at EDIRC.
Bibliographic data for series maintained by Antoine Haldemann ().