Guidepost to Wealth Creation: Value-Relevant Track Records
22 Pages Posted: 3 Jan 2008
Date Written: October 8, 2007
In creating wealth, the corporate sector is hampered by weaknesses in the corporate governance system and the accounting system. The analysis presented in this paper supports recommendations that managements and boards (1) provide value-relevant, long-term track records for the firm and its major business units and (2) use these track records to explain how their key decisions are consistent with long-term value maximization. Potential benefits include: (a) expedited learning by managements and boards about connections between economic performance and shareholder value, (b) abandonment of quarterly earnings as a decision guide, (c) more productive dialogue among the board, management, and investors, leading to quicker and better decisions for maximizing shareholder value and (d) more attention by accounting rule-makers to the experiences of primary users of accounting data in dealing with measurement problems critical to wealth creation, such as the handling of intangible assets.
Keywords: Corporate Governance, Shareholder Value Review, Maximizing Shareholder Value
JEL Classification: D21, G34, G38, L21, M41, M44
Suggested Citation: Suggested Citation