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

  • Jean-François Casta


    (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine)

  • Luc Paugam


    (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine)

  • Hervé Stolowy


    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - GROUPE HEC - CNRS : UMR2959)

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.

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Paper provided by HAL in its series Post-Print with number halshs-00541525.

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Date of creation: 20 Apr 2011
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Publication status: Published - Presented, European Accounting Association (EAA) 2011 annual meteing, 2011, Rome-Siena, Italy
Handle: RePEc:hal:journl:halshs-00541525
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  1. Williamson, Oliver E, 1983. "Organization Form, Residual Claimants, and Corporate Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 351-66, June.
  2. Pedro Miranda & Michel Grabisch & Pedro Gil, 2005. "Axiomatic structure of k-additive capacities," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00188165, HAL.
  3. 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.
  4. Wolfgang Schultze & Andreas Weiler, 2010. "Goodwill accounting and performance measurement," Managerial Finance, Emerald Group Publishing, vol. 36(9), pages 768-784, September.
  5. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, 09.
  6. Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, vol. 57(3), pages 571-87, May.
  7. repec:hal:journl:halshs-00496558 is not listed on IDEAS
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  9. Randolph B. Cohen & Christopher Polk & Tuomo Vuolteenaho, 2003. "The Price is (Almost) Right," NBER Working Papers 10131, National Bureau of Economic Research, Inc.
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  11. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
  12. Dechow, Patricia M. & Hutton, Amy P. & Sloan, Richard G., 1999. "An empirical assessment of the residual income valuation model1," Journal of Accounting and Economics, Elsevier, vol. 26(1-3), pages 1-34, January.
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