Working Paper Series
Recognizing Macroeconomic Fluctuations in Value Based Management
() and Clas Wihlborg
Abstract: Value Based Management (VBM) has become a common tool for
ex ante and ex post evaluation of corporate strategies and projects from
the perspective of shareholder value maximization (SVM). VBM-frameworks are
designed to support investment and divestment decisions, ex post evaluation
of management and their major strategic decisions, and bonus-systems.
Traditional VBM frameworks make no distinction between sources of temporary
changes in performance, and sources of performance reflecting the intrinsic
competitiveness of the firm. Temporary changes in performance are often
caused by macroeconomic fluctuations. In this article we develop an
approach for “filtering” the impact of macroeconomic fluctuations out of
measures of performance in order for management to obtain better
information for purposes of investment, divestment, and exposure management
decisions. We focus on filtering for purposes of performance assessment
employed in compensation schemes. A case study illustrates the approach,
and shows the potential magnitude of effects from macroeconomic events.
Keywords: Value Based Management (VBM); Shareholder Value Analysis (SVA); Economic Value Added (EVA); Performance Measurement; Macroeconomic Fluctuations; Bonus System; (follow links to similar papers)
JEL-Codes: D81; G31; (follow links to similar papers)
21 pages, February 8, 2002
Before downloading any of the electronic versions below
you should read our statement on
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
- This paper is published as:
Oxelheim, Lars and Clas Wihlborg, (2003), 'Recognizing Macroeconomic Fluctuations in Value Based Management', Journal of Applied Corporate Finance, Vol. 15, No. 4, pages 104-110
Questions (including download problems) about the papers in this series should be directed to Elisabeth Gustafsson ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Design by Joachim Ekebom