Shareholder Value Analysis Research Articles

A Mathematical Programming Approach to Supply Chain Network Design considering Shareholder Value Creation

One of the main goals of supply chain management is to ensure proper flows of products and information through all nodes to supply them in the right place at the right time. To achieve this objective, it is very important to consider flows of products and finances among supply chain nodes. Traditionally, operational and financial processes have been optimized as separate problems. The developed model addresses the problem of designing a supply chain network and tries to integrate both areas of operations and financial aspects to maximize the value created and measured by the Shareholder Value Analysis (SVA). The results show that with appropriate financial decisions, creating more value for the company and its shareholders is achievable. The developed model with a new financial approach is able to improve the total created shareholder value as much as 0.7% larger than the SVA obtained without financial aspects and 0.93% larger than the value created by the basic model. The main reason for an increase in value creation is due to new operational and financial aspects, which mainly show the possibility of closing facilities and bank debt repayments. To validate and show the applicability of the proposed model, it was solved by GAMS‐BARON solver with data provided from the literature. Sensitivity analyses on financial parameters were performed to evaluate the results.

The Role of Strategic Cost Management in Marketing Decisions: A Case Evidence of Brand Acquisition Assessment

While the role of strategic cost management (SCM) is heralded to pervade through all the links in a firm’s value-chain (Anderson, 2006; Shank & Govindarajan, 2004) the specific role of SCM in relation to a firm’s marketing function has thus far been limited to a few areas such as product pricing and analysing customer profitability through activity-based cost allocations (Datar & Rajan, 2018; Foster & Gupta, 1994; Van Raaij, 2005). This paper presents a case study to show how SCM concepts can be extended to evaluate brand acquisition by a large organisation. Using shareholder value analysis for pricing the brand and combining with financial statement analysis and strategic positioning models such as Porter’s five forces and SWOT, this paper conducts an assessment in order to offer recommendations for a multi-billion peso investment of a large Philippine-based processed foods company seeking to acquire a new brand.

Shareholders' Value Analysis: EVA & MVA in Relation to Stock Market Returns with Reference to the Indian Cement Industry

Understanding the value analysis and value creation of a company is essential for every financial manager in different situations. The value determination is carried out in various situations which may give positive or negatives results, resulting in serious jolts to the shareholders as well as to the goodwill of the company. Therefore, examining the shareholder value analysis is required to understand financial performance and it is critical to know whether modern techniques are supportive in creating value to the shareholders or not. This paper study the value analysis through modern techniques such as Economic Value Added (EVA), Market Value Added (MVA) and Stock Market Returns (StMr) of select twenty cement companies in India. This study evaluates the performance of the selected companies in terms of economic profit and market value and also tries to find the important metric among selected variables for creating shareholder wealth. In this study, twenty companies have been selected based on their market capital in Indian cement industry during the decade of 2005-06 to 2014-15. The study uses statistical tools for selecting the best metric among the variables through Mean, Coefficient and Multiple Regression with Stepwise method with the help of SPSS.

Shareholders’ Value Analysis: Eva & Mva In Relation To Stock Market Returns With Reference To the Indian Cement Industry

Understanding the value analysis and value creation of a company is essential for every financial manager in different situations. The value determination is carried out in various situations which may give positive or negatives results, resulting in serious jolts to the shareholders as well as to the goodwill of the company. Therefore, examining the shareholder value analysis is required to understand financial performance and it is critical to know whether modern techniques are supportive in creating value to the shareholders or not. This paper study the value analysis through modern techniques such as Economic Value Added (EVA), Market Value Added (MVA) and Stock Market Returns (StMr) of select twenty cement companies in India. This study evaluates the performance of the selected companies in terms of economic profit and market value and also tries to find the important metric among selected variables for creating shareholder wealth. In this study, twenty companies have been selected based on their market capital in Indian cement industry during the decade of 2005-06 to 2014-15. The study uses statistical tools for selecting the best metric among the variables through Mean, Coefficient and Multiple Regression with Stepwise method with the help of SPSS.

The Relative Efficiency of Banks, Taking into Account a Customer Satisfaction Rating

This paper uses customer satisfaction scores generated for a New Zealand wide survey of consumers to augment analysis of bank efficiency, and to achieve greater consistency with shareholder value analysis. It is found that the customer satisfaction score needs to be adjusted for the number of locations (branches) through which customers are served. Once this is done, the extent of divergence in efficiency is significantly reduced, consistent with propositions that a large divergence in efficiency scores should not be sustainable in a competitive market.

Teaching Marketing Strategy: Using Resource-Advantage Theory as an Integrative Theoretical Foundation

Knowledge of marketing strategy is essential for marketing majors. To supplement and/or replace the traditional lecture-discussion approach, several pedagogical vehicles have been recommended to teach marketing strategy, including the analytic hierarchy process; career-planning cases; computer-assisted, simulated marketing cases; experiential projects; life-history analysis; product-management projects; scenario planning; shareholder-value analysis; simulation; Web-based cases; and Web-based business-intelligence tools. Each of these approaches incorporates marketing-strategy knowledge content that consists of concepts, theories, and conceptuaal frameworks. Noting that the approaches to teaching marketing strategy lack an overall, integrative theory, this article proposes (1) resource-advantage (R-A) theory as an appropriate, positive, integrative theoretical foundation for teaching marketing strategy, (2) several conceptual frameworks drawn from R-A theory that are useful in teaching marketing strategy, and (3) suggestions on how to approach teaching R-A theory in the classroom.

Corporate Governance and Shareholder Value Analysis

In corporate governance today, there is a lot of emphasis on structural reform. Individual aspects of the board have increasingly been the focus of policy reform and shareholder activism. Specific attributes of board structure like the separation of the posts of chairperson and the CEO, percentage of outside directors on the board, etc., have become important considerations in the quest for effective corporate governance. In contrast, taking a process view of corporate governance, this article examines the utility of shareholder value analysis for corporate governance. In value-based management, shareholder value maximization is set as the objective of the firm. The adoption of this objective as the goal of the firm can promote effective corporate governance in three ways. First, it provides the necessary ‘pre-commitment’ between shareholders and managers regarding the goal of the firm. Second, it necessitates a greater flow of firm-specific information and the disaggregation of financial information. In corporate governance a clear identification of the goal of the firm and firm-specific information is important because of the incomplete contracts between shareholders and managers. Substantive flows of firm-specific information are needed to bridge the gaps in the incomplete contracts. Shareholder value management techniques, by providing this information in a non-agency context can provide a valuable input towards effective corporate governance. Finally, the goal of shareholder wealth maximization ensures a closer interdependence between strategy formation and the setting of operational objectives for managerial decisions. We illustrate some of these points with examples from the Lloyds–TSB experience of implementing shareholder value analysis and the findings of a study on investor communication.

Re-examining project appraisal and control: developing a focus on wealth creation

Capital investment appraisal techniques based on discounted cash flow have been in use since the 1970s. However, in spite of their popularity, the link between the value projects assured by these techniques and the value attained by the organization is not certain. Thus, there is a growing interest in the search for appraisal techniques, which directly link project value to shareholder value. Therefore, it is a universal principle to base choices on alternative courses of action both at the investment stage of the project, and during project execution. This paper reviews the strengths and weaknesses associated with traditional investment appraisal techniques and their effect on shareholder value. It also explores the prospects of shareholder value analysis as a candidate for the future investment evaluation and monitoring.

Strategic investment decision‐making: Managerial judgement on project risk and return

Until recently little attention has been given in Accounting and Finance literature to the problem of linking the results of financial evaluation techniques such as Net Present Value (NPV) and Shareholder Value Analysis (SVA) to managers’ cognitive evaluation of strategic factors and the risk profile of projects. Various authors have called for research in this area, but very little has so far been published. This paper reports on a field‐based study carried out in the logistics industry. It builds on earlier research, which elicited constructs that managers use to assess project risk using a repertory grid technique. It provides an insight into how a project risk analysis process can be linked with project returns in strategic investment appraisal (SIA) in a divisionalised organisation. An action research approach was taken to develop a decision matrix to link the risk assessment results to expected project returns as an aid to management in strategic investment decision‐making. It is now embedded in the investment appraisal procedures across the European group of companies that participated in the research. It is suggested that the framework adopted in this experimental study is transferable to other organisational contexts.

Valuing marketing's contribution

Marketing has not had the impact in the boardroom that its importance justifies. The major reason is that marketers have failed to show how marketing activities and costs influence shareholder value. Instead they have relied on metrics such as sales volume and customer awareness that are unrelated to financial performance. This paper redefines marketing in value terms and explains how shareholder value analysis can be used to demonstrate the importance of marketing, value brands and test marketing strategies.

Value-based marketing

Marketing has not had the impact on the boardroom that its importance justifies. A major reason is that today's top management are focused on shareholder value. Surprisingly, marketing has never sought to align itself to this goal, even though effective marketing is the central determinant of returns to investors. This paper explores how marketing creates value and shows how shareholder value analysis can be used as a powerful technique for developing and justifying marketing strategies.

The Application of Shareholder Value Analysis to the Marketing Strategy Case

Marketing strategy is largely concerned with the development and implementation of means by which firms can achieve superior long-run financial performance.Rao & Steckel (1998, 269)A team of students once performed a break-even analysis for a new car to be introduced by a major automobile manufacturer. The analysis was superbly done, and it revealed that the car should be made and sold without hesitation. It projected that the break-even point would be reached almost immediately and that profits would be forthcoming thereafter. Indeed, reality did match the projection; meanwhile, the corporation that undertook this profitable project watched its share price drop and then drop some more. This profitable business was unappealing to the shareholders and an albatross for the corporation.

Shareholder Value and Group Analysis

The article suggests a group-analytic approach to explain the behaviour of groups in situations determined by economic forces beyond their control. Its starting point arises from two propositions: Aristotle's claim that all human beings are basically members of communities and pursue a common goal, namely to enable everyone to lead a `good' life, and the argument presented by the philosopher Robert Solomon, that modern management needs to respect ethical obligations. A practical example is given to illustrate the interaction between leadership responsibility and commercial considerations. This leads to the conclusion that group analysis is a useful method to better understand the pressures and insecurities that accompany globalization and to help people to overcome such anxieties.

Shareholder Value and Group Analysis

Shareholder Value and Group Analysis

What's new in financial strategy?

What's happening in the field of financial strategy? Have Chief Financial Officers forsworn synergy in favor of the holding company model? Have planning teams adopted most of the best ideas of finance—such as shareholder value analysis—as their own? Do the finance and strategy functions compete or cooperate to steer their corporate ship?

Euro Disney: A Mickey Mouse project?

In this Case Study of Walt Disney's investment in a theme park near Paris, Roger Mills, James and Victoria Dimech Debono document the unfavourable economic conditions and over-optimistic projections that caused the successful launch of the project in 1992 to quickly turn sour. By using a Shareholder Value Analysis model they then show how estimates of shareholder value per share, based on information in the original prospectus, are drastically revised downwards as more realistic assumptions, like total debt owed, are built into the valuation model. In March 1994, a major financial restructing plan was agreed with Euro Disney's banks — but was this another Disney fantasy?

The role of strategic value analysis in European privatisation decisions

The privatisation of state-owned commercial assets is an unstoppable global trend, with particularly strong momentum in Western and Eastern Europe. The challenge is to be able to measure the value of the benefits arising as a result of privatisation. Roger Mills and Syamal Ghosh offer a method of valuation - Shareholder Value Analysis (SVA) - which is more appropriate and consistent with the private shareholder's perspective than conventional techniques. A numerical illustration is provided and the advantages of the SVA model set out.

Using Shareholder Value to Design Business-Unit Manager Incentive Plans

As more and more companies adopt a shareholder value analysis system to evaluate their business‐unit plans, there is a growing interest in using this approach to measure business‐unit performance and to calculate incentive bonuses for managers.

Using shareholder value to design business‐unit manager incentive plans

As more and more companies adopt a shareholder value analysis system to evaluate their business‐unit plans, there is a growing interest in using this approach to measure business‐unit performance and to calculate incentive bonuses for managers.

Linking product‐market analysis and shareholder value

Perhaps no other individual has written as extensively on value‐based planning as Alfred Rappaport. He is Leonard Spacek Professor of Accounting and Information Systems at Northwestern University and Chairman of The Alcar Group, Inc., a Chicago‐based firm that provides management education, consulting, and software for shareholder value analysis. Rappapon first began to formulate his ideas on how companies should manage for shareholder value in the late 1970s. In his recent book, Creating Shareholder Value (New York: The Free Press, 1986), he strongly advocated making value‐based planning a more integral part of strategic management. And this was the issue on which Planning Review focused its line of questioning.