Title: Determinants and consequences of applying value-based performance measures: the German evidence

Authors: Jurgen Ernstberger, Florian Egger, Matthias Giebelstein

Addresses: Chair of Accounting and Auditing, Ruhr-University Bochum, Universitatsstrasse 150, 44801 Bochum, Germany. ' ECOVIS Wirtschaftstreuhand GmbH, Wirtschaftsprufungsgesellschaft, Agnes-Bernauer-Str. 90, 80687 Munich, Germany. ' Deloitte & Touche GmbH, Axel-Springer Platz 3, 20355 Hamburg, Germany

Abstract: This paper examines the determinants of applying value-based performance measures like economic value added (EVA) and the impact of applying these measures on firms| returns. Our research design exploits a unique situation in Germany, where a regulatory change requires firms to describe their performance measurement system in their annual report since 2006. Analysing these disclosures, we find that firm size and firm age have a positive impact on the propensity of applying value-based performance measures. In a second analysis, we are not able to document a positive influence of the application of value-based performance measures on firms| performance. However, we find a significant positive association with firm valuation when controlling for self-selection. The paper contributes to the literature, as it is the first to comprehensively investigate the determinants and consequences of applying value-based performance measures.

Keywords: internal performance measurement; returns; value-based performance measures; economic value added; EVA; Germany; German Accounting Standard No. 15; GAS 15; management accounting.

DOI: 10.1504/IJAAPE.2010.031610

International Journal of Accounting, Auditing and Performance Evaluation, 2010 Vol.6 No.2/3, pp.224 - 248

Published online: 15 Feb 2010 *

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