Considering the shareholder perspective: value-based management systems and stock market performance
We empirically study the use of value-based management systems in listed German firms and examine implications for firms' stock market performance. Using a novel, hand-collected data set covering 1,083 firm years from 2002 to 2008, we find that value-based management systems become increasingly common. Specifically, in 2008 42% of our sample firms have implemented such a system. In the empirical analysis, we find that firms that implement value-based management systems earn statistically significant and economically substantial abnormal stock market returns measured within a two-year adoption phase. These excess returns are not jeopardized by poor post-adoption returns. In the analysis, we carefully control for risk and account for endogeneity concerns. Overall, our findings support the view that shareholders consider the adoption of a value-based management system as a credible signal that management will focus on shareholder interests and that such systems actually increase shareholder value.
|Date of creation:||2010|
|Date of revision:|
|Contact details of provider:|| Postal: Arcisstr. 21, 80333 München|
Fax: 089 289 25070
Web page: http://www.cefs.de/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- John D. Lyon & Brad M. Barber & Chih-Ling Tsai, 1999. "Improved Methods for Tests of Long-Run Abnormal Stock Returns," Journal of Finance, American Finance Association, vol. 54(1), pages 165-201, 02.
- Ingolf Dittmann & Ernst Maug & Christoph Schneider, 2010. "Bankers on the Boards of German Firms: What They Do, What They Are Worth, and Why They Are (Still) There," Review of Finance, European Finance Association, vol. 14(1), pages 35-71.
- Robert T. Kleiman, 1999. "Some New Evidence On Eva Companies," Journal of Applied Corporate Finance, Morgan Stanley, vol. 12(2), pages 80-91.
- John Y. Campbell, 2000.
"Asset Pricing at the Millennium,"
NBER Working Papers
7589, National Bureau of Economic Research, Inc.
- John Y. Campbell, 2000. "Asset Pricing at the Millennium," Harvard Institute of Economic Research Working Papers 1897, Harvard - Institute of Economic Research.
- Campbell, John, 2000. "Asset Pricing at the Millennium," Scholarly Articles 3294737, Harvard University Department of Economics.
- Carhart, Mark M, 1997. " On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
- Wallace, James S., 1997. "Adopting residual income-based compensation plans: Do you get what you pay for?," Journal of Accounting and Economics, Elsevier, vol. 24(3), pages 275-300, December.
- Hogan, Chris E. & Lewis, Craig M., 2005. "Long-Run Investment Decisions, Operating Performance, and Shareholder Value Creation of Firms Adopting Compensation Plans Based on Economic Profits," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 40(04), pages 721-745, December.
- A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
- Kothari, S. P. & Warner, Jerold B., 1997. "Measuring long-horizon security price performance," Journal of Financial Economics, Elsevier, vol. 43(3), pages 301-339, March.
- Biddle, Gary C. & Bowen, Robert M. & Wallace, James S., 1997. "Does EVA(R) beat earnings? Evidence on associations with stock returns and firm values," Journal of Accounting and Economics, Elsevier, vol. 24(3), pages 301-336, December.
- Aiyesha Dey, 2008. "Corporate Governance and Agency Conflicts," Journal of Accounting Research, Wiley Blackwell, vol. 46(5), pages 1143-1181, December.
- Brown, Stephen J. & Warner, Jerold B., 1980. "Measuring security price performance," Journal of Financial Economics, Elsevier, vol. 8(3), pages 205-258, September.
- Dimitris Kyriazis & Christos Anastassis, 2007. "The Validity of the Economic Value Added Approach: an Empirical Application," European Financial Management, European Financial Management Association, vol. 13(1), pages 71-100.
- Patrick T. Finegan, 1991. "Maximizing Shareholder Value At The Private Company," Journal of Applied Corporate Finance, Morgan Stanley, vol. 4(1), pages 30-45.
- Marc Goergen & Miguel Manjon & Luc Renneboog, 2008. "Is the German system of corporate governance converging towards the Anglo-American model?," Journal of Management and Governance, Springer, vol. 12(1), pages 37-71, March.
- Harley E. Ryan & Emery A. Trahan, 2007. "Corporate Financial Control Mechanisms and Firm Performance: The Case of Value-Based Management Systems," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(1-2), pages 111-138.
When requesting a correction, please mention this item's handle: RePEc:zbw:cefswp:201009. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.