ID 8852
Schmidt, Mario: Balancing the Value-Based Corporate Scorecard
Hamburg: Diplomica GmbH, 2005
Zugl.: Fachhochschule Schmalkalden, Diplomarbeit, 2003
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1
Contents
C
ONTENT OF
F
IGURES
...3
C
ONTENT OF
T
ABLES
...3
1
INTRODUCTION ...4
2
VALUE BASED MANAGEMENT...8
2.1
C
OMPONENTS OF
V
ALUE
...9
2.2
T
ANGIBLE
A
SSETS
...9
2.3
I
NTANGIBLE
A
SSETS
...10
2.4
V
ALUE
C
REATION
...15
3
CONCEPT AND CALCULATION OF THE ECONOMIC VALUE ADDED...18
3.1
B
ASIC
M
ODEL OF
EVA...20
3.1.1
C
ALCULATION OF
NOPAT...23
3.1.2
C
ALCULATION OF THE COST OF
C
APITAL
...24
3.1.3
C
ALCULATION OF
C
APITAL
...26
3.1.4
C
ALCULATION
E
XAMPLE AND OTHER ASPECTS OF
EVA ...26
3.2
A
PPLICATION
R
ANGE OF
EVA ...31
3.2.1
C
OMPENSATION AND
I
NCENTIVE
S
YSTEMS
...31
3.2.2
C
ORPORATE
V
ALUATION
...36
3.2.3
P
ERFORMANCE
M
EASUREMENT WITH
EVA...40
3.2.4
I
MPLEMENTATION OF
EVA ...43
C
RITICISM ON THE
EVA
APPROACH
...45
2
4
CONCEPT AND STRUCTURE OF THE BALANCED SCORECARD ...48
4.1
F
UNDAMENTALS OF THE
B
ALANCED
S
CORECARD
...49
4.1.1
A
COMPANY
'
S BENEFIT FROM A
B
ALANCED
S
CORECARD
...51
4.1.2
F
INANCIAL
P
ERSPECTIVE
...52
4.1.3
C
USTOMER
P
ERSPECTIVE
...55
4.1.4
I
NTERNAL
B
USINESS
P
ROCESS
P
ERSPECTIVE
...58
4.1.5
L
EARNING AND
G
ROWTH
P
ERSPECTIVE
...62
4.1.6
C
AUSE AND
E
FFECT RELATIONSHIP
...64
4.1.7
E
XAMPLE
D
ELL
...67
4.2
D
EVELOPMENT AND
C
ONVERSION OF A
B
ALANCED
S
CORECARD
S
TRATEGY
...69
4.2.1
T
HE STRATEGY FOCUSED
B
ALANCED
S
CORECARD
...70
4.2.2
M
OBILIZE CHANGE THROUGH EXECUTIVE LEADERSHIP
...72
4.2.3
T
RANSLATE STRATEGY INTO OPERATING TERMS
...73
4.2.4
A
LIGN THE ORGANIZATION WITH THE STRATEGY
...73
4.2.5
M
AKE STRATEGY EVERYONE
'
S JOB
...74
4.2.6
M
AKE FORMULATING STRATEGY A CONTINUAL PROCESS
...76
C
RITICISM ON THE
B
ALANCED
S
CORECARD APPROACH
...77
5
CONCLUDING REMARKS ...81
R
EFERENCES
...84
3
Content of Figures
F
IGURE
1: G
ENERIC
V
ALUE
C
HAIN
M
ODEL
...60
F
IGURE
2: T
HE PRINCIPLES OF A STRATEGY
-
FOCUSED ORGANIZATION
...71
Content of Tables
T
ABLE
1: C
ALCULATION OF
NOPAT ...23
T
ABLE
2: B
ALANCE SHEET
2001 / 2002 ...27
T
ABLE
3: P
ROFIT AND LOSS ACCOUNT
2001 / 2002 ...27
T
ABLE
4: B
ONUS CALCULATION BASED ON HISTORIC
EVA´
S
. ...34
T
ABLE
5: B
ONUS BANK SYSTEM
...35
T
ABLE
6: C
ORPORATE VALUATION WITH
EVA...40
4
1
Introduction
Today operating companies are exposed to a whole series of influence factors. The
globalization and deregulation of capital markets, the end of capital and exchange
controls, new challenges on the information technology sector, more liquid securities
markets, new trends with regard to investment decisions especially for institutional
investors represent only some of these factors. The competition around investment
capital moves more to the foreground. As a consequence of this fact is mentioned
that the orientation is specified at the shareholders. Thus a focusing is carried out on
the profit of the shareholders. With other words a culture of shareholder value has
developed.
1
A special meaning befits the corporate value with regard to the shareholder value.
The corporate value represents the result of the investments of the shareholders.
Therefore the effort to increase the corporate value is mirrored by the claims of the
shareholders.
In the recent years the term Value Based Management as synonymous has become
noted for a whole series of approaches to increase the corporate value.
2
Value
Based Management focuses the view on the tools, which are necessary to produce
performance and value. It means that everything, every process and every part of a
company has to be oriented in creating value.
3
This diploma thesis therefore will analyze how corporate value can be created, which
activities are necessary and how it can be measured. Furthermore it will be
represented how this process can be embedded in an integral approach.
Therefore in Chapter 2 will be explained main aspects of the Value Based
Management. In connection with this, special attention is given to the components of
value. The meaning and problems of the intangible assets shall particularly be
1
Cf. Young / O´Byrne, (2001), p. 5f.
2
Cf. Brunner, (2000), p. 20.
3
Cf. Young / O´Byrne, (2001), p. 18.
5
stressed in section 2.1.2. A general analysis of the process of value creation follows
it in section 2.1.3.
A further aspect of Value Based Management is the measurement of the results of
the company's activities. Therefore a bundle of different measures can be used. As
examples for this shall be mentioned the Cash Flow Return On Investment (CFROI),
the Economic Profit (EP), the Added Value (VA) or the Economic Value Added
(EVATM).
4
The CFROI approach was developed by the Boston Consulting Group.
5
The internal
rate of return of an investment can be expressed with the CFROI.
6
The Economic Profit is a development of the McKinsey & Company, Inc. and is
explained by Copeland, Koller and Murrin. They say that the Economic Profit
measures the money of economic value, which was created by a company in one
year.
7
Another approach is the Added Value (AV) concept of the London Business School
(LBS).
8
For Davis and Kay is the Added Value "...the amount by which the value of
corporate output exceeds the value of all inputs which the company uses including
not only material inputs, but also capital and labor."
9
The EVA concept is a development of Stern Stewart and Company. This assignment
will prefer EVA as the measure for the company's value and performance
10
, because
EVA is actually very popular in practice. The ability to adept this approach is higher
for every company and their special circumstances. EVA can be applied in many
cases, because it is more than a short view on single aspects in a company.
4
Stern Stewart & Company, a New York City consulting firm, holds a trademark acronym EVATM.
5
The CFROI approach was original developed by US American consulting company HOLT. HOLT
belongs now to the Boston Consulting Group.
6
Cf. Lewis, (1994), p. 250.
7
Cf. Copeland / Koller / Murrin, (2000), p. 178.
8
The concept was pictured in two articles of the Business Strategy Review in Summer 1990
(Assessing corporate performance: pages 1 16 by Davis and Kay) and in Summer 1991 (Who are
the world's most successful companies?: pages 1 33 by Davis, Flanders, and Star).
9
Cf. Davis / Kay, (1990), p. 1.
10
Cf. Hostettler, (2000), p. 1.
6
EVA works every time and it represents the right approach for every company and
every business environment.
11
The EVA concept is object of chapter 3. In section 3.1 will be explained the basic
requirements of the calculation of EVA. The calculation of the individual components
follows in the sections 3.1.1 to 3.1.3. In section 3.1.4 a calculation example is given
and further aspects of EVA will be mentioned. The various application fields of EVA
are explained in section 3.2. On the basis of EVA is described an incentive and
compensation system (section 3.2.1), corporate valuation (section 3.2.2) and
performance measurement (3.2.3). The section 3.2.4 explains the implementation of
EVA and it follows a critical appreciation of the concept.
Value Based Management includes not only the development of value based
measures and a strategy. Furthermore it is necessary to create a maneuvering
system. A Balanced Scorecard can be used to fulfill this requirement.
12
The Balanced Scorecard approach goes back to Kaplan and Norton. It is an
instrument for the implementation of a strategy in a company. Chapter 4 will discuss
the general structure, the benefits (section 4.1.1) and the perspectives of a Balanced
Scorecard (section 4.1.2 4.1.5). Afterwards follow explanations of the special
relationships between the perspectives, the so called cause and effect relationship
(section 4.1.6). Section 4.1.7 will give a simple Balanced Scorecard example.
Because the Balanced Scorecard is a strategy implementation tool, basic information
for the strategy development will be described under section 4.2. The stages of the
implementation are explained in section 4.2.1 to 4.2.6. With these explanations the
role of the management as an important factor at the introduction and conversion of a
Balanced Scorecard gets clear. Also is pointed out the meaning of the employees as
executive persons in a company (section 4.2.5).
11
Cf. Ehrbar, (1998), p. 5.
12
Cf. Wittmann, (1999), p. 174 f.
7
In the last section of the chapter Balanced Scorecard critical remarks regarding
possible weaknesses will be made. The problems of the approach examined
scientifically frequently mentioned are the reason for these remarks.
This thesis will explain the basis factors of Value Based Management and how
changes of the corporate value can be measured by EVA. In the following will be
shown how these two approaches can be integrated into the Balanced Scorecard.
Hereby shall be mentioned that in this thesis, the terms company and corporation as
well as corporate will be used synonymously. The same is valid for the words
Balanced Scorecard and scorecard.
8
2
Value Based Management
This chapter shall explain some aspects about Value Based Management (VBM),
and performance measurement. VBM in a broader sense contains a variety of
different positions.
Young and O´Byrne explain VBM with the orientation of the creation of value. All key
processes and systems of a company should be used, to increase the corporate
value. They recommend to consider the following elements in a VBM program:
strategic planning, capital allocation, operating budgets, performance measurement,
management compensation and internal and external (capital markets)
communication.
13
VBM requires a targeted control of the balance sheet and the profit
and loss calculation. Furthermore it is necessary to balance the short-term and long-
term perspectives.
14
An essential basis for VBM is, according to Ewert and Wagenhofer, the development
of value based measures. Target of these measures is to deliver information about
the performance and to lead the management decisions in the shareholder sense. To
summarize the meaning of the measures, it can be explained that they have
information and behavior control function.
15
The shareholder value approach finds its basis in the concept of the Value Based
Management. The core of the shareholder value approach is to increase the
corporate value and the performance for the shareholders.
16
Frigo points out the connection between VBM and strategy. VBM is a process with
which it is possible to determine the drivers of a strategy. These drivers should be
linked with value creation and should be used to communicate through the
organization.
17
13
Cf. Young / O´Byrne, (2001), p. 18.
14
Cf. Copeland / Koller / Murrin, (2000), p. 97.
15
Cf. Ewert / Wagenhofer, (2000), p. 4.
16
Cf. Schierenbeck / Lister, (1998), p. 20.
17
Cf. Frigo, (2002a), p. 6f.
9
These mentioned aspects of VBM should clarify the variety of points of view. Some
components, which are in the opinion of the author of special importance will be
explained now.
2.1
Components of Value
Tangible and intangible assets as well as value creation are object of this chapter.
Under point 2.1.2 some aspects of the intangible assets will be explained. The
increasing meaning of the intangible assets leads in this assignment to a more
detailed representation in comparison with the tangible assets. The picture can
therefore arise in a certain imbalance.
18
2.2
Tangible Assets
One of the classifications of tangible assets is the criterion of capital assets and
current assets. All objects, which are constantly at the business activity's disposal
count as one of the capital assets. These are for example land, buildings, company
and business equipment and machines. On the contrary current assets are used for
a limited time only. As example should be mentioned commodities, claims from
delivery and service or cash balance.
Another classification of tangible assets can be made by the criterion of financial and
physical assets. Stocks, bonds or cash are examples for financial assets.
19
Buildings,
completed or uncompleted products or raw material can explain physical assets.
Both financial and physical assets can be counted to the capital or current assets.
This depends on how they are used.
The valuation of tangible assets is determined by law regulations. Thereby choices
between some regulations are possible. The choice between LIFO (Last In First Out)
and FIFO (First In First Out) is an example for the valuation of raw material.
18
This, however, is intended by the author.
19
Cf. Hurwitz et al., (2002), p. 54.
10
In principle, the values of the asset objectives can be taken from the balance sheet.
Then these are the book values. But between book value and market value can be
an important difference. The book value of a building shall be 100,000 money units.
But the value on the market can exceed this by a multiple. In this manner the building
represents a hidden reserve.
2.3
Intangible Assets
Many different concepts are summarized under the words intangible assets.
Intangible assets are often described with human capital and knowledge,
relationships with business partners and the company's capability to be innovative.
20
Intellectual capital and the company's image are often mentioned in connection with
intangible assets.
21
For simplification reasons the concept intangible assets shall summarize all
aforementioned names.
Intangible assets got an increasing meaning in the last years. The proportion of
intangible assets in the market value of a company has increased from around 40
percent in the beginning of the 1980s to over 80 percent in the late 1990s.
22
Intangible assets are the value driver in the new economy.
23
Investments in research
and development (R&D), employee training or internet activities are creating future
growth.
24
Mutius sees that intangible assets get a new strategic meaning. Information and
knowledge are one of the most important resources in the economy. In the past the
company's success was based on the tangible assets. However, intangible assets
are the potential of the competitive advantages of tomorrow. Mutius thinks that there
20
Cf. Daum, (2002), p. 2.
21
Cf. Mutius, (2002), p. 10; Seetharaman / Sooria / Saravanan, (2002), p. 128.
22
Cf. Daum, (2002), p. 1.
23
Cf. Norton, (2001), p. 1.
24
Cf. Hurwitz et al., (2002), p. 53.
11
is a change from the "Economy of Scales" to an "Economy of Relations". Relations to
customers, analysts, investors and to the stock exchange are decisive for a
company. The capability to create these relations and securing its existence will have
a great influence on the corporate value.
25
To give a clear definition of intangible assets is very difficult. This is also a result of a
conference in 1999 in Hamilton Canada. A further-reaching problem is the
measurement and the reporting of intangible assets.
26
One approach to evaluate intangible assets was made by Baruch Lev and described
in an article of Hurwitz and others. The basis of this approach is that the realized
value of intangible assets can be seen in the company's earning performance. Only if
the company is able to generate more earnings as which can be led back on tangible
assets, the company has intangible assets. At first is to estimate the normal rate of
return on physical and financial assets in order to subtract their contributions from the
estimated economic performance of the company. The normal rate of return must be
multiplied with the values of the physical and financial assets. What remains is the
intangible asset contribution of the company's performance.
27
There are many other approaches. Some are based on a theoretical framework and
others are more practical oriented. For the theoretical ones is stated that they are not
tested, problematic and unrecognized. They also suffer under a lot of subjectivities.
The practical approaches have the problem to overcome the lack between the needs
of the internal and external users.
28
The second problem is the reporting and accounting of intangible assets.
25
Cf. Mutius, (2002), p.10f.
26
Cf. Seetharaman / Sooria / Saravanan, (2002), p. 129.
27
Cf. Hurwitz et al., (2002), p. 53f.
28
Cf. Seetharaman / Sooria / Saravanan, (2002), p. 136ff. For more detailed explanations of these
approaches see also this article.
12
Daum pleads for the point of view that intangible investments should be accounted
as assets. He also explains that experts recommend developing reports for intangible
assets, similar to the traditional financial reports. Daum also points out a system that
is used by the Swedish financial service provider Skandia. The report was designed
to give investors the chance to establish the actual value of the company. This report
includes intangible assets, called intellectual capital by Skandia.
29
Another approach is used by ten Danish and Swedish companies. They use the
intellectual capital accounts (ICA). This represents a tool for measuring and reporting
intangibles. The report has two dimensions: the category of human resources,
customer technology processes and as second dimension the type of measurement
for intangible assets. The second dimension consists of three parts. First statistical
information's which represent a statement of the company's resources. Internal key
figures are the second part. This part explains how the company uses its resources.
Effect goals are the third part. At this stage is revealed if the intellectual capital leads
to better products or services.
30
The meaning of intangibles cannot be overstressed, because they are the most
important drivers for stock returns.
31
The measurement and the reporting of intangible assets must be clear within the next
two years. Because from January 1
st
, 2005 the guidelines of the International
Accounting Standard Board require that every company in the European Union has
to report their intangible assets.
32
To give explanations of what is really value is nearly impossible. However, if you can
touch anything, it is not inevitable much worth.
33
Knowledge, creativity, relationship,
29
Cf. Daum, (2002), p. 19f.
30
Cf. Seetharaman / Sooria / Saravanan, (2002), p. 141f.
31
Cf. Hurwitz et al., (2002), p. 60.
32
Cf. Mutius, (2002), p. 10.
33
Cf. Ridderstråle / Nordström, (2000), p. 93.
13
contentment, joy, ideas, concepts, curiosity, experience, capabilities, communication
all that has value but they are hardly to measure, because they are intangible.
"Knowledge is power". Knowledge are the basis and the resources of every
company. These resources are necessary to collect and to make utilizable.
Knowledge is created by humans and humans are responsible to work with this
asset: knowledge. The existing knowledge can be increased by creative input.
34
Creativity is an asset of the humans. New things arise from the power of the
creativity. Companies should try to get it to unite creative potential as much as
possible in their organization.
For Microsoft the strongest asset is the human power of imagination.
35
Relationships between humans can inspire the creativity. The more different humans
are the more creativity can arise. Therefore companies should try to bring as much
as possible different people together and to connect relationships. Values arise from
the innovative and creative use and the combination of assets.
36
Content and happy people enjoy the work more. If the atmosphere of work is good
and it exists a feeling of community, a completely new strength can establish in a
company. This furthermore leads to the readiness to do things, which exceeds that
what' was required by the company.
37
Companies should also make thoughts to themselves about how new ideas and
concepts can arise. They should create the environment, which makes it possible
that ideas and concepts can arise and be developed.
Curiosity confirms humans to search for completely new things. Through this it is
possible to gain advantages opposite to others. However, this is only possibly under
34
Cf. Kenndy, (1998), p. 122f.
35
Cf. Ridderstråle / Nordström, (2000), p. 91.
36
Cf. Esser, (2000), p. 179.
37
Cf. Sveiby / Simons, (2002), p. 4f.
14
the condition that the curiosity will be given space and the curiosity can be satisfied
also.
An aspect often underestimated is the value of the experience. Of course it is right,
that experience alone is of little worth. This experience also must be in the position to
be turned over. Of course it is also right that experience should not be used to solve
problem always in the same way. It is necessary to authorize that new experiences
can be collected. Through this experience becomes a dynamic process.
Certain capabilities of a human are partly unique and they also should be used in a
company. If one sets capabilities limits, they cannot be used on a full scale, they are
then stunted.
38
If humans in a company do not communicate, how can they learn from each other?
The communication between the workers, the management, the suppliers, the
customers, the government, the society has a very strong influence on the value of a
company. Therefore the communication channels with all these participants in the
market economy should be open.
Prusak and Cohen lament the neglect of the social relations in the companies. They
emphasize three factors for this development. Firstly development of new techniques
for new markets, on which the companies have to react permanently, secondly the
creation of virtual working places and thirdly the increasing number of free working
employees of a company makes it difficult to build a social environment inside of the
company. But investments in social capital can increase to success of a company
too. Therefore Prusak and Cohen recommend to create strong relations, cooperation
and to promote the confidence within the company.
39
All the mentioned aspects represent assets, especially intangible assets. But they are
assets only, if they are used by the company. In other words assets, which a
38
Cf. Brynjolfsson / Hitt / Yang, (2002), p. 2ff.
39
Cf. Prusak / Cohen, (2001), p. 27.
15
company owns but (still) not uses, are valueless. Therefore the development and the
education of the humans in a company are of great importance.
2.4
Value Creation
Shareholder value can be explained with the orientation on the interests of the
shareholders. All activities in a company are used to increase the value of the
company. The orientation at the shareholder interests goes back to the variety of
different investment possibilities by the capital givers at all capital markets. Capital
market oriented companies fulfill the requests of the capital givers with the increase
of the company value.
40
The company's value is therefore reflected by the
shareholder value and vice versa.
The value creation process consists of several kinds of tools and activities.
The employees are the initiators of the value creation process. Therefore they play
an outstanding role in the value creation process. They must use the tools and
execute the activities. A prerequisite therefore is that they can understand and
handle this.
41
Esser describes the process of value creation with existence and search for new
potentials. Furthermore strategies must be developed which do fit to these potentials.
The strategy conversion is another important process in the process of value
creation. Therefore are instruments needed which can convert a strategy and are
able to measure the success.
42
The need for information about a company permanently grows. Analysts and
investors require more information than simple share prices. Therefore is it very
40
Cf. Pape, (1999), p. 1.
41
Cf. Esser, (2000), p. 176.
42
Cf. Esser, (2000), p. 186.
16
important to develop and extend the investor relations. This task should not be on the
task-list of the executive boards.
43
But investor relations and value reporting
44
can have advantages and disadvantages.
If a company has decided to publish more information,
this can get fast to a standard
for this company. To turn back this standard can have negative effects on the share
price for example. However, high transparency can on the other hand be rewarded
with higher share prices.
45
Because of this value reporting has a high meaning in the value creation process.
An old adage says: "What gets measured is what gets done".
Performance measurement makes it possible for the management to investigate,
whether striven targets were reached or not. If the targets were failed, they can
analyze where and by what degree the deviation exists.
46
Until now a variety of different approaches to measure and report the tangible assets
and the intangible assets exists. The problem of intangibles is not new, however, it
was neglected for a very long time. Companies are free to find their own way to
measure and report intangible assets. They can tailor the information to internal and
external users.
47
Two approaches which can help to fulfill the requirement of measuring, managing
and reporting the corporate value are the Balanced Scorecard and the Economic
Value Added approach.
48
These two approaches support the value creation process. The Balanced Scorecard
goes new ways in the analyses of the company as a whole, especially for the
43
Cf. Afra / Aders, (2001), p.106.
44
In connection with this, value reporting shall be understood as a component of investor relations.
45
Cf. Gössi / Simon-Keuenhof, (2001), p. 683f.
46
Cf. Williams, (2002), p. 19.
47
Cf. Seetharaman / Sooria / Saravanan, (2002), p. 145f.
48
These approaches will be discussed more detailed in chapter three (Economic Value Added) and
chapter four (Balanced Scorecard).
17
implementation of a strategy. A relative simple possibility gives EVA to measure
financial performance and the value development of a company.
Both methods and especially the Balanced Scorecard - shall be introduced and
explained with their advantages and disadvantages in the next two chapters.
18
3
Concept and calculation of the Economic Value Added
Somebody might ask why EVA became such a common measure. Stewart
49
gives a
simple answer. The market does not want earnings but the market wants value.
50
Stewart says that EVA is a measure of value and a measure of performance.
51
Hostettler sees EVA as a financial instrument which can be used to increase the total
return of a shareholder, to evaluate and analyze companies, divisions or projects, it is
useful to build target and incentive systems and it is simple to communicate.
52
Ehrbar thinks that EVA is a framework for a complete financial management and
incentive compensation system.
53
Similar are the points of view by Brewer, Chandra and Hock. They state that a
growing number of companies finds trust in the EVA approach. These companies
use EVA to evaluate and reward their managers.
54
The importance of EVA will be confirmed by the fact, that 37.5 percent of the DAX
100 companies use it as leading measure.
55
This assignment will focus on EVA as basis for a compensation and incentive
system, for corporate valuation and as performance measurement system.
Furthermore it will give some aspects of calculation and the use of the Market Value
Added (MVA).
Before calculating EVA it is important to point out the connection between EVA and
shareholder value.
56
49
Bennett Stewart is Senior Partner of Stern Stewart & Co.
50
Cf. Stewart, (1999), p. 2.
51
Cf. Stewart, (1999), p. 4.
52
Cf. Hostettler, (2000), p. 21.
53
Cf. Stewart, (1994), p. 84; Ehrbar, (1998), p. 1.
54
Cf. Brewer / Chandra / Hock, (1999), p. 4.
55
Cf. Tigges / Cokbudak, (2002), p. 9.
56
Cf. Hostettler, (1995), p. 308.
19
Also Fischer sees similarities between EVA and the Shareholder Value approach. He
explains that both are oriented on the company value.
57
The Shareholder Value approach is based on Rappaport.
58
According to Rappaport the Shareholder Value approach approximates the economic
value of an investment with discounting of future cash flows by capital costs. The
cash flows are based on the estimated future returns of the shareholder. Those
returns consist of dividends and the increasing value of the shares.
59
Hostettler says that shareholder value can be understood in two terms, firstly as a
financial measure and secondly as action maxim.
60
Interpreted as financial measure it reflects the value of a share. This value consists
mainly of dividends and the increasing value of the share at the stock exchange
market.
61
As action maxim the management has three possibilities to influence the shareholder
value.
Firstly operating decisions concerning the current business, like decide on which
products or services should be offered or which price and marketing policy to use.
Secondly it is important to think about the size of the deposit, how much capital
should be invested or disinvested.
Thirdly financial decisions are important. Meant are the decisions regarding the
amount of equity and debt capital, which sources of capital and the kind of financial
instruments will be used and how tax payments can be reduced.
62
Hostettler explains, if every decision category becomes assigned a numerical size
and they are connected, EVA will arise. Most operative decisions influence the Net
57
Cf. Fischer, (1999), p. 24.
58
Rappaport, Creating shareholder value, (1986)
59
Cf. Rappaport, (1999a), p. 53.
60
Cf. Hostettler, (2000), p. 22.
61
Cf. Hostettler, (1995), p. 308.
62
Cf. Rappaport, (1999a), p. 79f; Hostettler, (1995), p. 309.
Ende der Leseprobe aus 96 Seiten
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- , 2003, Balancing the Value-Based Corporate Scorecard, Hamburg, Bedey Media GmbH, https://www.diplom.de/document/224030
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