Determinants and consequences of applying value-based performance measures: the German evidence. (16th February 2010)

• Record Type: Journal Article
• Authors: Ernstberger, Jurgen; Egger, Florian; Giebelstein, Matthias
• Is Part Of: International journal of accounting, auditing and performance evaluation. Volume 6:Number 2/3(2010)
• Page Start: 224
• Page End: 248
• Publication Date: 2010-02-16
• Subjects: internal performance measurement -- returns -- value-based performance measures -- economic value added -- EVA -- Germany -- German Accounting Standard No 15 -- GAS 15 -- management accounting; 657
• Languages: English
• ISSNs: 1740-8008

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.