财务控制外文翻译.docx

1、财务控制外文翻译原文：Financial Control Effective corporate governance and financial control includes the use of monitoring and incentive mechanisms to align divergent interests between shareholders and managers and encourage the creation of shareholder value. Value-based management systems (VBM) provide an in

2、tegrated management strategy and financial control system intended to increase shareholder value by mitigating agency conflicts. In concept, VBM reduces agency conflicts and helps create shareholder value since it reveals value-increasing decisions to employees, allows for easier monitoring of manag

3、ers decisions, and provides a method to tie compensation to outcomes that create shareholder value. However, the degree to which VBM systems actually improve the economic performance of publicly held firms is an open question. To gain insight into this issue, we examine the use and economic efficacy

4、 of value-based management systems by 84 firms that adopt VBM systems from 1984 to 1997. We investigate two related research questions: (1) Does the adoption of a VBM system improve economic performance? And (2) What factors enhance or hinder the effectiveness of VBM systems? Our primary goal is to

5、examine whether the adoption of a VBM system improves economic performance. We recognize that firm performance and the decision to tie compensation to a VBM metric can be endogenous, which creates a potential sample selection bias. For instance, firms that are performing poorly face tougher challeng

6、es to creating economic value and could be more likely to tie compensation to VBM to provide managers the incentives to overcome these challenges. Alternatively, managers who expect to achieve a certain level of performance can negotiate a compensation contract based on the VBM metric that essential

7、ly assures a bonus payout. Our sample includes firms that base compensation on VBM metrics, but also firms that use VBM for analysis and evaluation only. Thus, we can examine why firms choose to tie compensation to VBM, which allows us to control for potential sample selection bias that results from

8、 endogenous relations between compensation plans and firm performance.With regard to our first research question, we find that firm performance increases following the adoption of value-based management systems. Compared to a matched firm based on industry, prior performance, and size, firms that ad

9、opt VBM systems increase residual income for the five years subsequent to the adoption of a VBM system relative to the year before adoption. The median firm in our sample increases industry- and performance-adjusted residual income divided by invested capital by over 7 percentage points for the five

10、-year period subsequent to VBM adoption. We do not find evidence that VBM encourages underinvestment in high-growth firms, suggesting that the improvement in residual income does not come at the expense of long-term value. With regard to our second research question, we find that firm size is the on

11、ly firm specific characteristic that relates to the effectiveness of VBM in all years. After controlling for possible sample selection bias, we find that large firms show less improvement than small firms. We note, however, that these regressions have low adjusted R2s. Possibly, this result suggests

12、 that larger firms face greater monitoring costs, which make it more difficult to implement programs in larger firms. In our multivariate analysis, we also find that (i) firms that perform better prior to adoption are more likely to tie compensation to VBM and (ii) the post adoption adjusted perform

13、ance in the first two years after adoption negatively relates to the use of VBM to determine compensation. This effect is not statistically significant after two years. It is possible that firms that already focus on value creation are more likely to tie VBM to compensation and that these firms simp

14、ly have less potential for improvement. Alternatively, firms might cap bonus payouts too low when they implement plans, which reduces initial efficacy. We also find that firms reduce capital expenditures following VBM adoption. These reductions in spending do not differ based on the firms growth opp

15、ortunities. Thus, the improvement in performance does not appear to come at the expense of long-term value. Overall, our results provide support that value-based management systems are effective mechanisms for improving corporate performance. The literature on property rights (e.g., Alchian and Dems

16、etz, 1972) and agency theory (e.g., Jensen and Meckling, 1976) maintains that different incentives lead to conflicts between shareholders and managers of the public firm that result in a loss in firm value. Ultimately, the shareholders bear this loss. Value-based management provides an integrated ma

17、nagement strategy and financial control system designed to mitigate these agency conflicts and increase shareholder value. VBM systems attempt to accomplish this goal by providing managers with a set of decision-making tools that, at least in theory, identify which alternatives create or destroy val

18、ue, and often by linking compensation and promotions to shareholder value. Firms can use these metrics to monitor and reward management performance. They provide a mechanism for linking managers decisions to firm performance outcomes that create shareholder value and provide a means to further align

19、 shareholder and managerial interests.Value-based management has captured the interest of the corporate and investment communities. Ryan and Trahan (1999) report that 87 percent of 86 CFOs surveyed indicate that they are familiar with value-based management. Most of these CFOs also indicate that the

20、ir firm uses one or more VBM systems. This interest has also been demonstrated in the business press. Articles in Fortune (e.g., Stires, 2001; Colvin, 2000; Tully, 1999) include a list of 1,000 companies ranked by how much market value they added during the past decade, based on Stern Stewarts marke

21、t value added (MVA) metric. These articles profile several corporations that have adopted a variety of management systems, based on different VBM metrics, in an effort to increase their value.We identify four variations of VBM metrics from these articles in the popular press. All of the metrics are

22、similar in that they are single-period measures of performance that take into account return on invested capital and the relevant cost of capital. They are all consistent with discounted cash flow valuation. Although consulting firms have popularized these metrics, many companies apply their own ver

23、sions of the metrics. We do not take any given metric to represent the work of a consulting firm that may have popularized the method. We provide a summary of these four metrics below:(1) Discounted Cash Flow (DCF)DCF methods, for instance shareholder value added (SVA), express value as expected fut

24、ure cash flows discounted to the present time at the companys cost of capital. See Rappaport (1998) for a more detailed discussion of DCF methods as they relate to value-based management.(2) Cash Flow Return on Investment (CFROI)CFROI expresses an estimate of a companys single-period cash flow as a

25、percentage of total investment. Madden (1999) provides a detailed discussion of CFROI.(3) Return on Invested Capital (ROIC)ROIC is defined as the ratio of net operating profits less adjusted taxes (NOPLAT) to invested capital. See Copeland, et al., (2000) for a more detailed discussion of ROIC.(4) R

26、esidual Income (RI)RI measures the excess earnings over a capital charge based on investment opportunities of similar risk. Stern Stewart & Co. popularized RI under the market name of EVA. See Wallace (1997) for a more detailed discussion of RI.Despite the attention afforded value-based management t

27、echniques and their widespread application, we have scant evidence on their ability to improve firm performance. Much of the existing empirical research, often conducted by the consulting firms who market value-based management systems, focuses on the relations between the metrics (or value-drivers)

28、 and shareholder value. These studies by consultants (e.g., Stewart, 1994) document positive relations between performance metrics (e.g., Economic Value Added (EVA) and historical stock-price performance. In contrast, an academic study by Biddle, et al., (1997) concludes that EVA explains shareholde

29、r returns no better than earnings. Copeland (2002) argues that contemporaneous measures of common value-based management metrics do not do a good job of explaining changes in stock prices, and that changes in expectations need to be considered. Copelands argument underscores the difficulty in testin

30、g for any relation between the use of VBM systems and stock price improvement.Our sample selection method distinguishes our study from previous studies. These relevant studies only have access to data on VBM compensation plans for top executives, and exclude firms that use VBM systems for evaluation

31、 and budgeting (see Ittner and Larcker, 1998, 2001). Our sample includes firms that tie VBM to compensation, and also firms that use VBM systems for evaluation, budgeting, and monitoring but not for compensation. This feature allows us to explore the more extensive use of VBM, and also allows us to

32、shed light on the endogenous decision process. Our sample also allows us to examine a broader group of value-based management systems, rather than only systems based on the EVA-type measures of residual income used in these prior studies.Our method makes three additional contributions. First, we ext

33、end our analysis of post-adoption performance to five years beyond the year of adoption, allowing us to examine longer-term effects. Second, we use different tax rates based on the statutory tax rate in effect for a particular year as opposed to assuming a constant tax rate for all years. Third, we use a cost of equity based on the capital asset prici