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A matrix approach to valuation and performance measurement based on accounting information considering different financing policies

Dirk Beyer ()
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Dirk Beyer: Hochschule Harz

Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, 2018, vol. 29, issue 1, 37-61

Abstract: Abstract Two of the most important issues related to value-based management are a company’s value and the contribution made to it in a certain period. Variations in residual income have been discussed and used for such kinds of valuation purposes and performance measurement for many years to link the value of a company to traditional accounting data. Considering certain financing policies with changing levels of debt, the technical problem of circularity has to be solved concerning the readjustment of the cost of capital. As a practical way to handle that issue, a matrix-based approach is presented in this article. The result of this technique is a vector of the current and future expected amounts of a firm’s goodwill. This vector provides a useful base simultaneously for valuation purposes and for measuring the contribution made to the corporate value in a particular period. Thus, the method presented tackles these two main issues of value-based management at once solely by focusing on traditional accounting data.

Keywords: Residual income; Corporate valuation; Value-based management; Performance measurement (search for similar items in EconPapers)
JEL-codes: G (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:spr:jmgtco:v:29:y:2018:i:1:d:10.1007_s00187-018-0262-4