Estimating return on leadership development investment

When making capital investment decisions organizational leaders are trained to consider the financial return on investment. Yet, the same expectation typically does not exist for investments in leadership training. We suggest that decisions regarding leadership training and development ought to use a similar approach as the process leads to organizations incurring cost for an anticipated benefit, like any other investment. In the current paper, we describe how to estimate the return on leadership development investment (RODI) and the implications for measuring organizational effectiveness from such analyses. Using different guiding assumptions, scenarios, length of the intervention, and level of management participating in the leader development program, the expected return on investment from leadership development interventions ranged from a low negative RODI to over 200%.     

Assessing the performance of a development bank

The performance of a development bank can be assessed on the basis of ‘financial function’ and ‘development function’ criteria. While the financial function measures its operational efficiency in terms of the profitability of its investment operations, the developmental function evaluates its allocational efficiency as reflected by its investment activities for the economic development of the country and the stimulation of the capital market. The objective of this paper is to appraise the performance of the Industrial Finance Corporation of India, in terms of its profitability. The profitability has been analysed with reference to its (i) operating earnings, (ii) cost of operations, (iii) gross and net profit margins on the loan portfolio and (iv) rate of return and capital appreciation on the securities portfolio. The paper concludes with suggested measures to improve its profitability in future.     

A specific accounting approach for public universities

Many universities in Germany and other countries have introduced financial (or commercial) accounting to manage effectively their finances. It aligns with so-called new public sector management reforms worldwide. In this paper we analyze whether the components of this type of financial accounting reform suit the nature and objectives of German public universities. While the analysis mainly relates to the German situation, there are likely to be implications for public universities universally. Drawing on an analysis of the reports of two well known German-speaking universities, Heidelberg and Vienna, we analyze whether the components of the new financial accounting reforms suit the nature and objectives of those public universities. While we argue that cash-flow statements and balance sheets remain important, it is shown that it is necessary for state-run educational institutions to change several key elements of traditional commercial accounting. Because the success goals of such universities are non-profit-oriented, their financial accounting should be augmented by a ‘change in value statement’, replacing the traditional income statement. As their valuation cannot be correlated with the definition of profit in (German) public universities this term is suggested. By change in value we mean specifically that assets may experience a total loss or a decrease in value. In management accounting output measures and performance indicators should substitute revenues as the counterpart of costs. Furthermore, long-term financial decisions play a crucial role in universities. Therefore, a form of investment accounting is very important for them. The conventional form has to be modified by ‘investment statements’ and ‘knowledge balances’ of their intellectual capital. In this paper we also show how the concept of a balanced scorecard can be applied to public universities and how specific accounting instruments can be integrated into it.     

Rising prices,financial statements and fundamental research

Adequate consideration cannot be given to the subject of inflation accounting without a rigorous reappraisal of the nature and usefulness of published financial statements. It is argued that much fundamental research is a necessary prerequisite for the evaluation of methods of accounting in a period of inflation. Such research should begin with a consideration of the purposes to be served by the publication of financial statements. A framework is presented for such fundamental research and the results of some preliminary work outlined to assess the usefulness of financial statements in providing information to assist investors to make investment decisions. The use of financial statements by investors for this purpose is one of a number of possible objectives for financial statements.     

组织知识、制度环境与风险投资机构的联合投资

风险投资行业在中国发展迅猛,对促进国家经济转型和鼓励本土创新创业具有重要战略意义。本文从知识基础观出发,探究中国风险投资机构的组织知识积累与其联合投资行为之间的关系,并讨论了外部制度环境因素对这一关系的影响。基于对中国风险投资机构首轮投资纵向历史数据的实证分析,本文发现:风险投资机构基于特定行业和地域的组织知识积累和该机构与其他风险投资机构进行联合投资的可能性负相关,而投资活动所在地的市场化程度作为调节变量,削弱了风险投资机构的组织知识和联合投资之间的负向关系。     

Participation in Strategic Decision Making: The Role of Organizational Predisposition and Issue Interpretation*

Each time managers are faced with a strategic decision they decide how to decide. Specifically, they make choices about who has necessary information and, therefore, who needs to participate in the decision. Such responses to strategic issues are believed to be affected by the way in which decision makers interpret issues. However, organizations develop habitual responses to issues and may be predisposed because of their attention to rules and routines, or because of past performance, to respond to strategic issues in certain ways regardless of how issues are interpreted. We examined the direct and indirect effects of predisposition (rule orientation and past financial performance) and interpretation of strategic issues on the participation of internal stakeholder groups in strategic decision making. Executives in 52 organizations indicated that rule orientation and performance are directly linked to participation in strategic decision making, and that interpretation and rule orientation are directly linked to each other. Implications for managers include the notion that any effort to improve decision-making effectiveness by shaping how organizational members frame and interpret issues will be constrained by the organization's existing routines as well as its past performance.     

Earnings per share is a poor indicator of performance

One of the greatest dangers in corporate financial planning is failing to separate investment decision making from financial policy, because poor quality investments can appear to be desirable as a result of the particular financing vehicle employed. Management's focus of attention should not be rates of growth and earnings per share or return on net worth. Rather, the most important measure of corporate performance is the rate of return on total capital employed. The paper identifies the dangers of employing an earnings per share criterion for evaluating corporate performance, and suggests an alternative: focusing on a company's free cash flow, net operating profits after taxes minus the amount of new capital investment required in order to generate future profits. The author presents an analytical framework employing his free cash flow concept which can be applied to pricing and financing acquisitions.     

Accounting Performance and Capacity Investment Decisions: Evidence from California Hospitals

Capacity decisions involve trade‐offs between the cost of capacity and the opportunity costs of lost sales. Accounting researchers posit that accounting performance provides sufficient information about these trade‐offs and thus can be used to formulate simple rules to assist capacity decisions. Empirical research has not examined the role of accounting information in capacity investment decisions at the department level in a multiproduct firm in the presence of social costs. Empirical analyses using department‐level data from California hospitals for the period 1998–2005 show that hospitals are more likely to make capacity investments in departments with high accounting performance. However, in the presence of demand variability, the association between accounting performance and capacity investment is attenuated because of the resulting increase in noise in accounting performance measures. Thus, the weight on accounting performance as a decision tool for capital investments reduces when there is demand variability. Another factor that reduces the weight on accounting performance is capacity utilization. Higher capacity utilization can lead to turning away or rerouting of patients to other hospitals and negatively impacts reputation and quality of care, which increases the hospital's social costs. Hence, hospitals do not require high accounting performance before investing in a department with high capacity utilization. This empirical evidence of the role of accounting performance in capacity investment decisions fills a gap in the capacity investment literature and furthers our understanding of the interactions between accounting performance and the operational determinants of firms’ capacity investment behavior.     

The learning organization and its dimensions as key factors in firms' performance

Managerial responses to the Dimensions of the Learning Organization Questionnaire^© together with both perceptual and objective measures of firms' financial performance were analysed. Multiple regression equations were developed to examine the relationship between overall learning organization score and the performance variables return on investment (ROI), return on equity (ROE), earnings per share (EPS), net income per employee and percentage of sales from new products. The results of the study suggest that there is a positive relationship between learning organization behaviours and business performance.     

Korreferat zum Beitrag: Hanno Merkt,Die Rolle des Bilanzrechts in der aktuellen Corporate Governance-Diskussion

Objective of my discussion is to assess the findings of Hanno Merkt and to provide some suggestions regarding several of the discussed issues. The coactions of company law and capital market regulation as well as codices pertaining to accounting and corporate governance as mentioned by Hanno Merkt call for a differentiated approach. In particular, a distinction regarding capital market orientation of companies as well as regarding differing purposes of individual and consolidated financial statements has to be made. Also, I encourage the research community to discuss the company’s management and monitoring philosophy (“Unternehmensinteresse”) and its enforcement in more detail (again). In my opinion, financial reporting serves the purpose of accountability and therefore is—in this sense—only a part of corporate governance in the area of capital markets.     

Erosion handelsrechtlicher GoB durch das Bilanzrechtsmodernisierungsgesetz

The Accounting Law Modernization Act (BilMoG) aims at harmonizing two basic attitudes that are irreconcilable in the first place: On the one hand the local German GAAP, which are driven by creditor protection, the principle of prudence as well as objective limitations; on the other hand international accounting standards (IFRS), which focus on information tasks. The option to capitalise certain intangible fixed assets that have not been acquired from a third party, leads to a de-objectification of the balance sheet that has to be rejected as being too hazardous. Furthermore, the introduction of fair-value accounting for financial instruments acquired for trading purposes has to be rejected due to a breach of the realisation principle. The primary legal purpose of the balance sheet, the prudent determination of distributable profits on the basis of turnover, would be jeopardized. The desire for information on investment in intangible assets as well as the (alleged) increase in value of financial instruments should rather be displayed in the notes to the financial statements.     

Social information within the intellectual capital report

The objective of our work is to propose the integration of two complementary statements on financial information: the social report and the intellectual capital report. Both are statements of great importance in the current business context. The motive behind our proposal is that, in reviewing the current situation, we observed an overlap in the contents and goals of the two reports. For instance, information of a social nature is dealt with in the different blocks of analysis of intangibles in the intellectual capital report. Furthermore, these disclosures share the direct or indirect goal of improving the company's corporate image, which also reflects the links between the two types of reports. Hence, given the observed similarities and the greater flexibility and scope of the intellectual capital report, we propose incorporating the social report into the intellectual capital report. The benefits of this will be twofold: a reduction in the direct costs of preparing the report, and a simplification of the non-financial information for the different stakeholders.     

The effect of investment on unit cost and on profit

This paper investigates the effects of investment decisions on unit cost, profit and return on capital. Its purpose is to propose an alternative formulation to conventional cash flow methods for investment appraisal. This formulation can be combined with a methodology for assessing the short-run effects of management decisions and/or external factors on cost and profit performance measures.     

企业领导者的社会责任取向、企业社会表现和组织绩效的关系研究

企业领导者的社会责任取向、企业社会表现和组织绩效存在一定关系。根据以往的研究,企业社会责任取向包括经济取向、法律取向、伦理取向和慈善取向4个维度。在研究中,把企业社会表现拟合为员工、消费者、股东、强制环保、自觉环保、社区和特殊群体7个因子,把组织绩效分为市场绩效、财务绩效和人力绩效3个因子。研究发现,在企业社会责任取向、企业社会表现和组织绩效3者的关系中,企业社会表现起着中介作用。此外,对国外学者设计的企业社会责任取向问卷进行了本土化,并首次将企业社会责任取向、企业社会表现和组织绩效纳入一个研究框架中。     

股权结构、财务困境成本与困境公司绩效

本文以1997—2003年发生财务困境的105家上市公司为研究样本,以资本支出率度量公司投资水平,以销售增长率与“EBIT/总资产”度量公司绩效,采用单变量与多变量分析方法。研究发现,第一大股东持股比例越大,困境公司的投资与绩效水平越高;股权制衡对困境公司不再具有显著的积极作用;由于预算软约束的存在,国有公司比非国有公司在财务困境期间具有更低的财务困境成本,失去了更少的投资机会、市场份额与利润,从而表现出更高的投资与绩效水平;公司是否被企业集团控制与财务困境成本及困境公司的投资、绩效水平没有显著相关性。     

会计理论与实务研究的现状与展望——中国会计学会高等工科院校分会第15届学术年会综述

介绍了"中国会计学会高等工科院校分会2008年学术年会(第15届学术年会)暨中央在鄂集团企业财务管理研讨会"的概况,并分内部控制与审计、资本市场与财务、会计准则与财务报告、会计教学及其他和中央在鄂集团企业财务5个专题简要介绍了学术交流的内容.     

Stakeholder value disclosures: anchoring on primacy and importance of financial and nonfinancial performance measures

In the growing debate about stakeholder values, there has been little discussion about information overload or whether the requested disclosures can be effectively used. Stakeholder advocates call for complicated and massive environmental and related social disclosures while not considering how information overload might affect the discourse about corporate performance. Stakeholders, including shareholders, plead for more transparency in financial statements, management discussion and analysis (MDA), and other corporate disclosures. As we know, shareholders and boards of directors are most concerned with the ‘Holy Trinity’ of earnings per share, dividends and market value changes. We believe that managers and stakeholders involved in performance evaluations have multiple interests that extend beyond traditional shareholder value measures. We note that the Balanced Scorecard (BSC) was developed as one tool to reflect and communicate these multiple measures. We test how managers use (or ignore) multiple performance measures and we posit that stakeholders will face many of the same constraints when using and processing multiple disclosures including Corporate Social Reports (CSR), environmental, or similar disclosures. While we do not directly test a wide variety of stakeholder disclosures, we examine eight (four for a single subject) shareholder values (financial measures) and four stakeholder values (nonfinancial measures). The eight measures included in our research instruments serve as proxies for the multiple concerns that might be of interest to many stakeholders. Note that stakeholders are likely to be extremely interested in nonfinancial performance measures, while many shareholders will likely concentrate on financial performance measures. Field research has reported managers tend to favor financial measures while discounting or ignoring nonfinancial measures when evaluating subordinates, making it difficult to align performance evaluations and incentives with corporate strategies (Ittner et al. Account Rev 78:725–758, 2003). In this study, we find the relative weights managers place on financial and nonfinancial performance measures are influenced by both (1) presentation order and (2) the relative importance of specific measures. When financial measures are presented first, the manager who performs better on financial measures is rated higher than the manager who performs better on nonfinancial measures. However, when nonfinancial measures are presented first, managers who excel on nonfinancial measures are rated higher. Reports that include financial measures that are relatively more (less) important also produce higher (lower) ratings for the manager who excels on financial measures. Thus, the relative weights that superiors place on financial and nonfinancial measures in evaluating corporate managers’ performance are substantially anchored both by the order in which measures are presented as well as by the importance of the specific performance measures employed. Other stakeholder disclosures are likely to be similarly anchored, perhaps biased, by primacy and a priori importance rankings.     

Value-based management as a tailor-made management practice? A literature review

Value-based management is largely discussed as fundamental tool to manage organizations successfully. However, it is often criticized for its alleged incentive to maximize short-term profits. Thus, it is the aim of this study to shed more light on the role of value-based management for organizational success and discuss which firms seemingly benefit from the adoption of value-based management systems. Since adoption rates vary among firms, the implementation and its effect on organizational performance may be a matter of systematic circumstances. In particular, the extent of agency conflicts and arrangements to alleviate those conflicts designate where value-based management potentially serves as an effective monitoring instrument. Additionally, a more reactive strategic orientation and low growth opportunities imply a need for more efficient capital management as one lever to increase organizational performance. These conditions are accompanied by managerial characteristics and industry pressure that determine the use of value-based management systems, and do not undermine its incentive for efficient capital management. Hence, value-based management seems to be tailor-made for these specific circumstances.     

Designing communication support systems for strategic planning

While as a distinct and intermittent managerial activity planning is slowly dying, in a systematic and continuous context it is rapidly growing! More and more organizations are beginning to realize that planning entails ongoing learning and adaptation of people rather than one-shot, pseudo-scientific analysis of abstract problems. To facilitate this fundamental transformation in organizational thinking, new electronic management support systems are being created. These systems will facilitate collaborative problem exploration through improved managerial communication. In effect, they will actively assist managers to understand and manage the relationships between the strategic planning process and the other corporate processes such as budgeting, capital investment, performance evaluation and employee compensation.     

‘Belonging’ to a Virtual Research Centre: Exploring the Influence of Social Capital Formation Processes on Member Identification in a Virtual Organization

Identification, a person's sense of belonging, is thought to have positive outcomes because those who identify strongly will be more motivated to achieve organizational goals. This study applies a social capital lens in order to highlight how different social capital formation processes contribute to member identification, with a focus on virtual organizations where dispersed membership may preclude face‐to‐face interactions. The study provides a rare opportunity to explore variation in identification in a single organizational context. The results highlight how some dimensions of social capital augment each other and affect identification through the four conditions that influence social capital development: time, interdependence, interaction and closure. The study suggests that, while creating interdependence and an array of means for interaction support the development of both social capital and identification, not all members of the organization need to feel equally connected. Partial closure appears beneficial for information flows and ‘renewal’ of the virtual organization.