Article Summary
Recognizing
Macroeconomic Fluctuations in Value Based Management by Lars Oxelheim
and Clas Wihlborg is about Value Based Management (VBM) having 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
Oxelheim and Wihlborg 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.
Oxelheim and Wihlborg
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.
See also: |
Articles on VBM |
Books on VBM | Faq on VBM | Methods &
Models on VBM |
