Exploring Value-Based Management Sophistication - The Role of Potential Economic Benefits and Institutional Influences

52 Pages Posted: 5 Nov 2015 Last revised: 28 Feb 2018

See all articles by Sebastian Firk

Sebastian Firk

University of Groningen - Department of Accounting and Auditing

Torben Schmidt

University of Göttingen

Michael Wolff

University of Göttingen

Date Written: April 5, 2017

Abstract

The complexity of value-based management (VBM) is often not captured in empirical research. In particular, potential differences in the extent of VBM implementation are not considered. Firms are predominantly classified dichotomously into either VBM “adopters” or “non-adopters.” In this study, we aim to fill this gap by introducing a framework to assess differences in the extent of VBM implementation (VBM-sophistication) based on publicly available data. This approach enables us to study determinants of VBM-sophistication based on a hand-collected dataset comprising 2,683 firm-year observations from 16 European countries between 2005 and 2014. Specifically, we investigate (1) whether potential economic benefits associated with VBM implementation lead to a higher level of VBM-sophistication and (2) if this relation is influenced by extra-organizational institutions (e.g., industry norms). Our results indicate that companies exhibit higher VBM-sophistication if certain firm characteristics that increase the potential economic benefits of VBM are present. Moreover, our study provides evidence that this effect is enhanced by extra-organizational institutions that pressure and support firms in realizing the potential benefits of higher VBM-sophistication.

Keywords: Value-based Management, management accounting practices, practice variation, institutions

JEL Classification: M41, D22, L22

Suggested Citation

Firk, Sebastian and Schmidt, L. Torben and Wolff, Michael, Exploring Value-Based Management Sophistication - The Role of Potential Economic Benefits and Institutional Influences (April 5, 2017). Contemporary Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2686447 or http://dx.doi.org/10.2139/ssrn.2686447

Sebastian Firk (Contact Author)

University of Groningen - Department of Accounting and Auditing ( email )

Postbus 72
9700 AB Groningen
Netherlands

L. Torben Schmidt

University of Göttingen ( email )

Platz der Gottinger Sieben 3
Gottingen, D-37073
Germany

Michael Wolff

University of Göttingen ( email )

Platz der Göttinger Sieben 3
Göttingen, DE 37073
Germany

HOME PAGE: http://www.contolling.uni-goettingen.de

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