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Non-additivity in accounting valuation: Internally generated goodwill as an aggregation of interacting assets

Author

Listed:
  • Jean-François Casta

    () (DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique)

  • Luc Paugam

    () (DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique)

  • Hervé Stolowy

    () (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this paper we propose a new method to explain the creation and measure the value of internally generated goodwill (IGG). Our method is based on the idea that firm value is affected by interactions between assets used in combination to conduct business. This novel approach contrasts with the traditional additive approaches to valuing IGG, which assume assets are independent. We use Choquet capacities, i.e., non-additive aggregation operators, to explain the creation of IGG, and demonstrate from a sample of U.S. high technology sector firms that this model performs better than the traditional additive Ohlson model on accuracy in forecast enterprise value.

Suggested Citation

  • Jean-François Casta & Luc Paugam & Hervé Stolowy, 2011. "Non-additivity in accounting valuation: Internally generated goodwill as an aggregation of interacting assets," Post-Print halshs-00541525, HAL.
  • Handle: RePEc:hal:journl:halshs-00541525 Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00541525v3
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    References listed on IDEAS

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    1. Randolph B. Cohen & Christopher Polk & Tuomo Vuolteenaho, 2009. "The Price Is (Almost) Right," Journal of Finance, American Finance Association, vol. 64(6), pages 2739-2782, December.
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    3. Jean-François Casta & Xavier Bry, 2003. "Synergy Modelling and Financial Valuation: the contribution of Fuzzy Integrals," Post-Print halshs-00170504, HAL.
    4. Grabisch, Michel & Kojadinovic, Ivan & Meyer, Patrick, 2008. "A review of methods for capacity identification in Choquet integral based multi-attribute utility theory: Applications of the Kappalab R package," European Journal of Operational Research, Elsevier, vol. 186(2), pages 766-785, April.
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    6. Miranda, P. & Grabisch, M. & Gil, P., 2005. "Axiomatic structure of k-additive capacities," Mathematical Social Sciences, Elsevier, vol. 49(2), pages 153-178, March.
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    Keywords

    Internally generated goodwill; Going concern goodwill; Synergy; Choquet integral; Residual income model;

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