IDEAS home Printed from
   My bibliography  Save this article

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


  • Dirk Beyer

    () (Hochschule Harz)


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.

Suggested Citation

  • Dirk Beyer, 2018. "A matrix approach to valuation and performance measurement based on accounting information considering different financing policies," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 29(1), pages 37-61, March.
  • Handle: RePEc:spr:jmgtco:v:29:y:2018:i:1:d:10.1007_s00187-018-0262-4
    DOI: 10.1007/s00187-018-0262-4

    Download full text from publisher

    File URL:
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Cooper, Ian A. & Nyborg, Kjell G., 2006. "The value of tax shields IS equal to the present value of tax shields," Journal of Financial Economics, Elsevier, vol. 81(1), pages 215-225, July.
    2. Enrique R. Arzac & Lawrence R. Glosten, 2005. "A Reconsideration of Tax Shield Valuation," European Financial Management, European Financial Management Association, vol. 11(4), pages 453-461, September.
    3. Ian A. Cooper & Kjell G. Nyborg, 2008. "Tax‐Adjusted Discount Rates with Investor Taxes and Risky Debt," Financial Management, Financial Management Association International, vol. 37(2), pages 365-379, June.
    4. Steven Cahan & Dirk E. Black & Steven Cahan, 2016. "Other comprehensive income: a review and directions for future research," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 56(1), pages 9-45, March.
    5. Richard S Ruback, 2002. "Capital Cash Flows: A Simple Approach to Valuing Risky Cash Flows," Financial Management, Financial Management Association, vol. 31(2), Summer.
    6. Robert A. Taggart & Jr., 1991. "Consistent valuation and Cost of Capital Expressions With Corporate and Personal Taxes," Financial Management, Financial Management Association, vol. 20(3), Fall.
    7. Joel M. Stern & G. Bennett Stewart & Donald H. Chew, 1995. "The Eva® Financial Management System," Journal of Applied Corporate Finance, Morgan Stanley, vol. 8(2), pages 32-46, June.
    8. Myers, Stewart C, 1974. "Interactions of Corporate Financing and Investment Decisions-Implications for Capital Budgeting," Journal of Finance, American Finance Association, vol. 29(1), pages 1-25, March.
    9. Wolfgang Schultze & Andreas Weiler, 2010. "Goodwill accounting and performance measurement," Managerial Finance, Emerald Group Publishing, vol. 36(9), pages 768-784, August.
    10. Ittner, Christopher D. & Larcker, David F., 2001. "Assessing empirical research in managerial accounting: a value-based management perspective," Journal of Accounting and Economics, Elsevier, vol. 32(1-3), pages 349-410, December.
    11. Kruschwitz, Lutz & Löffler, Andreas & Scholze, Andreas, 2006. "Passivierungsgrundsätze und Discounted Cashflow-Verfahren," Hannover Economic Papers (HEP) dp-330, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    12. Osband, Kent & Reichelstein, Stefan, 1985. "Information-eliciting compensation schemes," Journal of Public Economics, Elsevier, vol. 27(1), pages 107-115, June.
    13. Dominic Detzen, 2016. "From compromise to concept? – a review of ‘other comprehensive income’," Accounting and Business Research, Taylor & Francis Journals, vol. 46(7), pages 760-783, November.
    14. Isik Inselbag & Howard Kaufold, 1997. "Two Dcf Approaches For Valuing Companies Under Alternative Financing Strategies (And How To Choose Between Them)," Journal of Applied Corporate Finance, Morgan Stanley, vol. 10(1), pages 114-122, March.
    15. Bhimani, Alnoor & Soonawalla, Kazbi, 2005. "From conformance to performance: The corporate responsibilities continuum," Journal of Accounting and Public Policy, Elsevier, vol. 24(3), pages 165-174.
    16. Robert S. Harris & John J. Pringle, 1985. "Risk-Adjusted Discount Rates-Extensions From The Average-Risk Case," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 8(3), pages 237-244, September.
    17. Fernandez, Pablo, 2004. "The value of tax shields is NOT equal to the present value of tax shields," Journal of Financial Economics, Elsevier, vol. 73(1), pages 145-165, July.
    18. Ansay, Thomas, 2009. "Firm valuation: tax shields & discount rates," MPRA Paper 23027, University Library of Munich, Germany, revised 20 May 2010.
    19. Kirby, Aj & Reichelstein, S & Sen, Pk & Paik, Ty, 1991. "Participation, Slack, And Budget-Based Performance Evaluation," Journal of Accounting Research, Wiley Blackwell, vol. 29(1), pages 109-128.
    20. Martin L. Weitzman, 1976. "The New Soviet Incentive Model," Bell Journal of Economics, The RAND Corporation, vol. 7(1), pages 251-257, Spring.
    21. Grinblatt, Mark & Liu, Jun, 2008. "Debt policy, corporate taxes, and discount rates," Journal of Economic Theory, Elsevier, vol. 141(1), pages 225-254, July.
    22. Fernandez, Pablo, 2006. "The correct value of tax shields: An analysis of 23 theories," IESE Research Papers D/628, IESE Business School.
    23. Fieten, Paul & Kruschwitz, Lutz & Laitenberger, Jorg & Loffler, Andreas & Tham, Joseph & Velez-Pareja, Ignacio & Wonder, Nicholas, 2005. "Comment on "The value of tax shields is NOT equal to the present value of tax shields"," The Quarterly Review of Economics and Finance, Elsevier, vol. 45(1), pages 184-187, February.
    24. Bennett Stewart, 2009. "EVA Momentum: The One Ratio That Tells the Whole Story," Journal of Applied Corporate Finance, Morgan Stanley, vol. 21(2), pages 74-86, March.
    25. Federica Doni & Silvia Rossetti & Roberto Verona, 2017. "Performance Reporting Choices after the Adoption of IAS 1 Revised: Comparative Evidence from Europe and the USA," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 558-574.
    26. Miles, James A. & Ezzell, John R., 1980. "The Weighted Average Cost of Capital, Perfect Capital Markets, and Project Life: A Clarification," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 15(3), pages 719-730, September.
    27. Fernandez, Pablo, 2004. "Reply to "The value of tax shields is equal to the present value of tax shields"," IESE Research Papers D/576, IESE Business School.
    28. Martin Ellis, 2001. "Goodwill Accounting: Everything Has Changed And Nothing Has Changed," Journal of Applied Corporate Finance, Morgan Stanley, vol. 14(3), pages 103-112, September.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Residual income; Corporate valuation; Value-based management; Performance measurement;

    JEL classification:

    • G - Financial Economics


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:jmgtco:v:29:y:2018:i:1:d:10.1007_s00187-018-0262-4. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Springer Nature Abstracting and Indexing). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.