 Financialized accounts: Restructuring and return on capital employed in the S&P 500Tord Andersson, Colin Haslam and Edward Lee Accounting Forum, 2006, vol. 30, issue 1, 21-41 Abstract: A central feature of financialization is the argument that the relative autonomy of management has been realigned with the interests of shareholders and their demand for higher returns on capital employed (ROCE). This paper reveals that average ROCE in the S&P 500 has not been transformed in the 1990s, relative to an earlier period, even after extensive corporate restructuring. Deconstructing S&P 500 ROCE reveals how additional cash and profit generated out of income are offset by inflated balance sheet capitalization putting a brake on the ROCE. In the US business combinations are now accounted for at their market value and this, we argue, is forcing a financialized ratchet because management will need to step-up cost reduction to finance balance sheet restructuring. Corporate cash is being used to finance share buy-backs which: facilitate balance sheet restructuring, improve reported ROCE and provide a pool of treasury stock that can be used to reward managers who deliver shareholder value. This paper concludes that the nature and relative scale of these financial transactions can be employed to construct financialized accounts. Date: 2006 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:accfor:v:30:y:2006:i:1:p:21-41 Ordering information: This journal article can be ordered from DOI: 10.1016/j.accfor.2006.01.001 Access Statistics for this article Accounting Forum is currently edited by Carol Tilt More articles in Accounting Forum from Taylor & Francis Journals |
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