Measuring Value Creation Research Articles

Investment and Financing Perspectives for a Solar Photovoltaic Project

In this work we illustrate a simple logical framework serving the purpose of measuring value creation in a real-life solar photovoltaic project, funded with a lease contract, a loan contract and internal financing (i.e., withdrawal from liquid assets). We use the projected accounting data to compute the value created. We assess the project from both an investment perspective (operating assets and liquid assets) and a financing perspective (debt and equity). Furthermore, focusing on value creation for equity-holders, we calculate the expected contribution on shareholders wealth increase of operating and financing activity. In particular, we highlight the role of the distribution policy in financial modeling, by underlining the strict logical connections between estimated data and financial decisions.

Value creation efficiency of Polish construction companies listed on Warsaw Stock Exchange during 2010-2012

Measuring the efficiency of enterprise value creation is the basis for assessing the profitability of capital investment by its shareholders. The conceptualisation and application of the value creation measures were related to the creation and development of the value-based management concept. These measures also enriched the financial analysis, becoming tools for the analysis of the enterprise value. The purpose of this article is to analyse the value creation efficiency of Polish construction companies listed on the Warsaw Stock Exchange with showing the possibility of using the mentioned measures to assess the value creation efficiency. This will enable to answer the research questions formulated for the purposes of analysis. The article is based on an analysis of the literature and the use of value creation measures, constituting a scientific reflection presented from the perspective of the few years that have passed since the analysed period.

Value creation efficiency of Polish construction companies listed on Warsaw Stock Exchange during 2010-2012

Measuring the efficiency of enterprise value creation is the basis for assessing the profitability of capital investment by its shareholders. The conceptualisation and application of the value creation measures were related to the creation and development of the value-based management concept. These measures also enriched the financial analysis, becoming tools for the analysis of the enterprise value. The purpose of this article is to analyse the value creation efficiency of Polish construction companies listed on the Warsaw Stock Exchange with showing the possibility of using the mentioned measures to assess the value creation efficiency. This will enable to answer the research questions formulated for the purposes of analysis. The article is based on an analysis of the literature and the use of value creation measures, constituting a scientific reflection presented from the perspective of the few years that have passed since the analysed period.

Big Data in Capturing Business Value

ABSTRACT The study investigates an issue of Big Data (BD) and elements shaping BD-based business value creation. The outcome of this research is to build and verify a framework to provide value based on BD. The framework contains three components: dynamic capabilities of organizations, integrated process of BD resource exploration and exploitation, and identification and measurement of business value creation. The framework has been subjected to initial verification by conducting the survey among 25 organizations.

The Shareholder Value Mess (And How to Clean it Up)

Abstract Shareholder Value is not only a myth, as forcefully demonstrated by Lynn Stout. It has also led to a mess under the form of extensive negative externalities and growing inequalities. A different measure of value creation is urgently required.

Entrepreneurial entrepreneurship youth education: initiating grounded theory

We seek to fill a gap in the understanding of pre-entrepreneurial education. We use a field study to flesh out initial prescriptions on how to build successful high school entrepreneurship education programs. We draw from the applicable studies and related theoretical frameworks to highlight drivers of success. We conclude that the kind of heterogeneity in embodied in the ‘pre-entrepreneur’ high school students needs to be addressed better in our educational systems and our other societal support systems, that our educational systems need to recognize that people not only ‘think differently’ as entrepreneurs but also at different points in their lives, and that points to a need for innovation in business schools, especially in entrepreneurship education, to leverage what potential that the new high school models build. Thus, we propose that programs that leverage identifiable and meaningful heterogeneity in their students, expectations, and communities will experience greater success across many measures of value creation.

From the Hands of an Early Adopter’s Avatar to Virtual Junkyards: Analysis of Virtual Goods’ Lifetime Survival

One of the major questions in the study of economics, logistics, and business forecasting is the measurement and prediction of value creation, distribution, and lifetime in the form of goods. In ”real” economies, a perfect model for the circulation of goods is impossible. However, virtual realities and economies pose a new frontier for the broad study of economics, since every good and transaction can be accurately tracked. Therefore, models that predict goods’ circulation can be tested and confirmed before their introduction to ”real life” and other scenarios. The present study is focused on the characteristics of early-stage adopters for virtual goods, and how they predict the lifespan of the goods. We employ machine learning and decision trees as the basis of our prediction models. Results provide evidence that the prediction of the lifespan of virtual objects is possible based just on data from early holders of those objects. Overall, communication and social activity are the main drivers for the effective propagation of virtual goods, and they are the most expected characteristics of early adopters.

Does corporate hedging enhance shareholder value? A meta-analysis

The theories underpinning corporate use of derivatives are well developed. Furthermore, there exist compelling economic reasons why hedging should lead to enhanced shareholder value, but empirical evidence in support of a substantial value increase from hedging is, at best, mixed. In this paper, we synthesize the empirical evidence for value enhancement in firms' hedging with derivatives using a statistical meta-analysis combining data from 47 different studies. Our findings indicate that firms' hedging with derivatives have larger Tobin's Q, a commonly used measure of value creation. A variety of moderating variables are assessed, providing evidence of heterogeneity in the value relevance of corporate hedging. In particular, we find that relatively higher firm value is primarily associated with hedging of foreign exchange risk.

Value Creation and Competitive Advantage: Empirical Evidence from Dividend Champions of the S&P 500

The aim of the paper is to verify, through the measurement of value creation, the existence of a competitive advantage in those companies recognized as “Dividend Champions” in the S&P 500. The paper uses a quantitative and explorative method of research and is divided into two sections: in the first, it identifies, within the S&P 500, those companies that have systematically, for more than 40 years, distributed dividends that have grown each year (60 firms), and in the second, it gives a comparative analysis of the Return on Invested Capital and Weighted Average Cost of Capital of the analysed firms, in order to investigate the existence of a competitive advantage. The results of our research show that the “Dividend Champions” have, in comparison to their main competitors of reference in the US market, a lasting competitive advantage, in virtue of a higher profitability with respect to the cost of capital. Specifically, we can observe that the “Dividend Champions”, classified by sector, are also “Value Champions”, able to beat competitors and having a lasting competitive advantage

Models of Value Creation Measurement in Different Manufacturing Industry Sectors in the Czech Republic

The subject of this article is the construction of a model which is able to measure whether an enterprise is creating or destroying value. However, in the light of our previous research, we are not seeking to create a universal model, instead we want to create a set of special models that consider the specificities of different sectors. Therefore, we have created three models especially for the food industry, engineering and transportation. In addition to the differences found within the model structure, we also want to discuss their causes, including more general cross-sectoral differences. Based on the EVA ratio, we divided each of the surveyed sectors into three groups (creating value, destroying value and enterprises where it cannot be decided whether they create or destroy value – so called “grey zone” enterprises). Based on a study of the literature, about 32 financial ratios were selected which are commonly used to evaluate the performance of a company. Using logistic regression, statistically significant differences were identified between the selected financial indicators within the groups of enterprises creating and destroying value. The statistically significant regression functions represent models capable of distinguishing enterprises that create or destroy the value. By retrospectively comparing them with the EVA ratio, it is possible to set the limits of the relevant models so that they divide the enterprises under examination into three groups (value-creating enterprises, value-destroying enterprises and “grey zone” enterprises). The aim of the article is to construct value-measuring models in various sectors of the manufacturing industry. We start from the premise that it is very difficult to construct a universal model that is able to measure the value in different sectors equally well. Therefore, using the example of three manufacturing industries (namely the food industry, engineering and transportation), we constructed three models and then compared and discussed the differences observed. The results confirmed that there are significant differences between the models of value creation within the three sectors which we studied. The main difference in each sector is its capital structure. For each model, we selected a different number of indicators using statistical methods to create the optimal model. It was also discovered that each model has different limitations among the groups. This is a result of the fact that the models are created from different indicators. The first research limitation is that the focus is only on three sectors. As part of further research, it will be necessary to construct different models in other sectors as well. The second limitation of the research is that it focuses purely on finance, which does not allow many options to identify and discuss the internal and qualitative differences of the enterprises and sectors under examination, which could contribute to increasing the accuracy of the model. The model is constructed from publicly available data, which is both a limitation and an advantage. On the one hand, it limits the ability to inform the user, while on the other, it allows for wide usage without having to know internal data.

Value adding in the agri-food value chain

Global agricultural markets reflect the increasing complexity of modern consumer demand for food safety and quality. This demand has triggered changes throughout the food industry, and led to greater opportunities for product differentiation and the potential to add value to raw commodities. Greater differentiation and value adding over time has in turn dramatically changed the price spread or marketing bill between the farm value of products and the retail value. Thus a significantly greater percentage of the final price paid by consumers is now garnered down chain rather than up chain over the last 20 years. This apparent shifting of value creation or addition, as measured by the marketing margin, has invigorated empirical questions as to where, and how much value, is created along the agri-food value chain. First we define value creation/adding, and then we estimate the economic value added for 454 firms. We validate our findings by creating and employing three additional value creation measures – the modified economic value added, the creation or destruction of value, and the persistence of value creation. Finally we estimate value creation at each node of the value chain, measure the relative differences among firms and nodes, and estimate a model measuring the drivers of value adding.

Performance of impact investing: A value creation approach

The purpose of this article is to present an overview about the origins of value creation in impact investing and propose a measure of value creation. According to this point of view, impact investing, i.e. investing in enterprises with a both social and financial objective can be justified only if those enterprises can provide for a higher performance than with a simple portfolio diversification (separate investment in two types of activity). After an overview about the sources of value creation in impact investees as well as about a discussion on existing methods, we propose a method to measure multidimensional value creation.

Transportation, Jobs, and Social Networks

Logistics clusters in the US provide economic benefit, but expansion has not produced proportionate sector job growth. We hypothesize a network effect not accounted for in traditional analysis. Total Requirements matrix data for the 15 major US industry clusters provides a model of an economic social network. Using egonets from social network analysis, we propose network measures of value creation and leverage, a form of productivity, for each sector. We identify specific connected sectors where jobs and value are created. A quadrant assessment of our two measures classifies industry sectors as to amount of influence. Transportation and Wholesaling sectors create high leverage in the industries they touch, using relatively low creation of their own value added (margins on product). For development policy decisions, assessments of a sector’s impacts must include evaluating job creation in the proper networked sectors.

Value creation measures: an industry-based study

PurposeThe purpose of this paper is to identify the shareholder value creation measure best suited to express shareholder value creation for a particular industry.Design/methodology/approachThe analysis was performed on 192 companies listed on the Johannesburg Stock Exchange, classified into nine different samples or industries. Five shareholder value creation measures were examined, namely market value added (MVA), a market-adjusted stock return, the market-to-book ratio, Tobin’s Q ratio, and the return on capital employed divided by the cost of equity.FindingsAn analysis of the nine categories of firms led to the identification of different measures that are suited to express value creation. Stock returns did not provide an appropriate value measure. Instead, depending on the specific industry, Tobin’s Q ratio, MVA, and the market-to-book ratio should be used to measure and express value creation.Practical implicationsFor management, the value drivers identified for each industry present a clear indication of industry-specific variables upon which they can focus in operating activities to most efficiently increase shareholder value.Originality/valueUnlike previous studies that use only one or two different shareholder value creation measures as dependent variables, this study uses five different value creation measures. Another contribution of this study is the compilation of a unique set of value drivers that explain shareholder value creation separately for each of the nine different categories of firms.

Does Corporate Hedging Enhance Shareholder Value? A Meta-Analysis

The theories underpinning corporate use of derivatives are well developed. Furthermore, there exist compelling economic reasons why hedging should lead to enhanced shareholder value, but empirical evidence in support of a substantial value increase from hedging is, at best, mixed. In this paper, we synthesize the empirical evidence for value enhancement in firms’ hedging with derivatives using a statistical meta-analysis combining data from 47 different studies. Our findings indicate that firms’ hedging with derivatives have larger Tobin’s Q, a commonly used measure of value creation. A variety of moderating variables are assessed, providing evidence of heterogeneity in the value relevance of corporate hedging. In particular, we find that relatively higher firm value is primarily associated with hedging of foreign exchange risk.

Corporate governance and value creation: a study of selected Indian companies

Good governance is integral to the existence of a company. It inspires and strengthens investor confidence and has a fundamental role in evolving and shaping the overall business environment. In the Indian context there is scant literature on the impact of corporate governance on value creation. The purpose of the paper is to examine the impact of good corporate governance implementation on value creation by S&P Bombay Stock Exchange (BSE) Greenex companies of India, measured by economic value added (EVA). In this paper a corporate governance index has been attempted as a proxy to firm's corporate governance quality. The index is based on three main themes - board of directors, transparency and disclosure and investor relations. Economic value added (EVA) has been used as a measure of corporate value creation. The results show that quality of corporate governance has a positive relationship with value creation i.e., EVA of these companies. However, the impact is found to be not significant.

Corporate governance and value creation: a study of selected Indian companies

Good governance is integral to the existence of a company. It inspires and strengthens investor confidence and has a fundamental role in evolving and shaping the overall business environment. In the Indian context there is scant literature on the impact of corporate governance on value creation. The purpose of the paper is to examine the impact of good corporate governance implementation on value creation by S&P Bombay Stock Exchange (BSE) Greenex companies of India, measured by economic value added (EVA). In this paper a corporate governance index has been attempted as a proxy to firm's corporate governance quality. The index is based on three main themes - board of directors, transparency and disclosure and investor relations. Economic value added (EVA) has been used as a measure of corporate value creation. The results show that quality of corporate governance has a positive relationship with value creation i.e., EVA of these companies. However, the impact is found to be not significant.

The Relationship between the Market Value Added of SMEs Listed on AIM Italia and Internal Measures of Value Creation The Role of Corporate Strategic Planning

Objectives - In saying that measurement of financial performance plays an important role in the capital allocation choices, the aim of this study is to test the relationships between Market Value Added (MVA), stockholders value measures and presence of formal strategic plan.Methodology - The study is among descriptive and correlational researches and using panel data methodology on sample of SMEs listed in AIM Italia. The time under study was from 2010 to 2015. In addition, the hypotheses of the research have been tested using Rahavard Novin software for data collection and SPSS 20.0 for data analysis.Findings - The results indicate that Refined Economic Value Added (REVA) has more correlation with Market Value Added (MVA) than Economic Value Added (EVA); in addition, the results obtained using panel data methodology shows that the use of strategic plans influences the relationship between value performance measures and MVA.Research limits - Data used for this study need to be subjected to more statistical tests in order to establish a more robust validity and reliability. It is necessary to acquire further strengthened data and assume a variety of conditional situations. It is expected that subsequent studies can use larger samples and diversified by sector, a broader geographic base and a multi-faceted analyses.Practical implications - This work offer necessary evidences in order to help capital market participants to make rational decision in investment process.Originality of the study - The originality of this study is the correlation between MVA, financial measures and use of strategic planning for value management.

Managing procurement value creation with a maturity model

ABSTRACTAfter 30 years of existence, the purchasing function is still looking for increased maturity. In this paper we present research which proposes a unified concept for procurement or purchasing maturity management (PMM) by bridging the gap between purchasing practice improvement and value creation measurement. To date, many maturity models have been proposed, by scholars, practitioners or consultants, without establishing a direct link between the level of maturity, value, Supplier Relationship Management (SRM), and external maturity of the supplier panel. From an academic point of view, an ‘all in one’ and ‘integrated’ purchasing maturity concept is proposed: Purchasing Integrated Maturity Model (PIMM). From an executive point of view, the model is on the one hand holistic by covering not only the company purchasing function but also its supplier panel, and on the other hand ‘integrated’ by including all company stakeholders.

Value creation disclosure in CSR reports: evidence from Poland

Value creation disclosure in CSR reports: evidence from Poland Nowadays, many companies are involved in the idea of corporate social responsibility (CSR) and they perceive it as a source of value creation. But the question arises if companies measure and report the value created via CSR engagement or whether they present mainly descriptive information concerning their actions and activities within CSR. The aim of this paper is to present what the CSR reporting prac- tices in Poland are concerning value creation measurement and disclosure. The theoretical concept of value creation via CSR activities is analyzed and confronted with a practical disclosure in all the CSR reports published by Polish companies in the years 2013-2015. To achieve the research aim, a literature review, content analysis of source documents (CSR reports), synthesis, and the deductive method were used. In the paper, the descriptive approach to accounting is applied.