Value-Based Management and Corporate Governance: a Study of Serbian Corporations

Stancic, Predrag and Todorovic, Miroslav and Cupic, Milan (2012): Value-Based Management and Corporate Governance: a Study of Serbian Corporations. Published in: ECONOMIC ANNALS , Vol. 57, No. 193 (May 2012): pp. 93-112.

Abstract

The aim of this paper is to determine the place and role of corporate governance and performance measures in the efforts of managers to maximize shareholder value, and the attitude of Serbian corporations toward these issues. The paper first analyses the importance of corporate governance and performance measures in the context of value-based management. Then, through the multiple case study, we investigate the attitude of seven Serbian corporations toward defining the general corporate objective, corporate governance, and performance measurement. Finally, we point out the factors and preconditions that determine corporate culture, objective definition, and performance measures used by Serbian corporations.

• Item Type: MPRA Paper
• Language: English
• Keywords: shareholder value; corporate governance; performance measures
• Subjects: L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification, and Scope; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L21 - Business Objectives of the Firm; G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers ; Acquisitions ; Restructuring ; Corporate Governance; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill

References

Adams, R.B. & Mehran, H. (2008). Corporate Performance, Board Structure, and Their Determinants in the Banking Industry. Federal Reserve Bank of New York Staff Report No. 330. June 2008.

Andres, P. de & Vallelado, E. (2008). Corporate Governance in Banking: The Role of the Board of Directors. Journal of Banking and Finance, 32 (12), pp. 2570-2580.

Andres, P., Azofra, V., & Lopez, F.J. (2005). Corporate Boards in OECD Countries: Size, Composition, Compensation, Functioning and Effectiveness. Corporate Governance: an International Review, 13 (2), pp. 197–210.

Barton, D. & Wong, S.C.Y. (2006). Improving board performance in emerging markets. The McKinsey Quarterly, 1, pp. 35-43. Bogićević Milikić, B., Janićijević, N. & Petković, M. (2008). HRM in Transition Economies: The Case of Serbia. South East European Journal of Economics and Business, 3 (2), pp. 75-88.

Bogićević Milikić, B. & Janićijević, N. (2009). Cultural Divergence and Performance Evaluation Systems: A Comparative Analysis Study of Three Serbian Companies. Economic Annals, 54 (180), pp. 40-55.

Bouwens, J. & Van Lent, L. (2007). Assessing the Performance of Business Unit Managers. Journal of Accounting Research, 45 (4), pp. 667-697.

Chen, G. & Guliang, T. (2009). Subjective Performance Measurement: Multi-Case Study Based on Chinese Corporations. (Paper presented at PMA Conference 2009). Retrieved from http://www.pma.otago.ac.nz/pma-cd/papers/1093.pdf.

Coombes, P. & Watson, M. (2000). Three surveys on corporate governance. The McKinsey Quarterly, 4, pp. 74-77.

Copeland, T., Koller, T., Murrin, J. (1994). Valuation: Measuring and Managing the Value of Companies. Hoboken, NJ: John Wiley and Sons.

Čupić, M. (2011). Usaglašenost računovodstvenih merila sa ciljem maksimiziranja vrednosti za akcionare. Ekonomske teme, 49 (1), pp. 123-136.

Dahya, J., Dimitrov, O. & McConnell, J. (2008). Dominant Shareholder, Corporate Boards, and Corporate Value: A Cross-Country Analysis. Journal of Financial Economics, 87 (1), pp. 73-100.

Durnev, A. & Kim, E.H. (2005). To Steal or Not to Steal: Firm Attributes, Legal Environment, and Valuation. Journal of Finance, 60 (3), pp. 1461-1493.

Eisenhardt, K. (1989). Building Theories from Case Study Research. Academy of Management Review, 14 (4), pp. 532-550.

Eisenhardt, K. (1991). Better Stories and Better Constructs: The Case for Rigor and Comparative Logic. Academy of Management Review, 16 (3), pp. 620-627.

Fitzgerald, L. (2007). Performance Measurement. In T. Hopper, D. Horthcott and R. Scapens (eds.), Issues in Management Accounting (pp. 223-241). Harlow, UK: Pearson Education Limited.

Hemofarm Group. (2003). Annual Report 2003. Retrieved from http://www.vibilia.rs/srpski/izvestaj/0401/hemofarm_160804.pdf.

Јаnićijević, N. (2003). Uticaj nacionalne kulture na organizacionu strukturu preduzeća u Srbiji. Economic Annals, 48 (156), pp. 45-66.

Jensen, M. (2001). Value Maximization, Shareholder Theory, and the Corporate Objective Function. Journal of Applied Corporate Finance, 14 (3), pp. 8-21.

Jensen, M., & Meckling, W. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics 3 (4), pp. 305-360.

Johnson, S., La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2000). Tunneling. American Economic Review Papers and Proceedings, 90 (2), pp. 22-27.

Kaličanin, Đ. (2005). Menadžment zasnovan na vrednosti: teorijska osnova, akcionarski zahtev i koncept. Economic Annals, 50 (165), pp. 165-184.

Kennerly, M. & Neely, A. (2002). A Framework of the Factors Affecting the Evolution of Performance Measurement Systems. International Journal of Operations and Production Management, 22 (11), pp. 1222-1245.

Koller, T., Goedhart, M. & Wessels, D. (2005). Valuation: Measuring and Managing the Value of Companies. New Jersey: John Wiley & Sons.

La Porta, R., Lopez‐de‐Silanes, F., Shleifer, A., & Vishny, R.W. (1998). Law and Finance. Journal of Political Economy, 106 (6), pp. 1113-1155.

La Porta, R., Lopez‐de‐Silanes, F., Shleifer, A., & Vishny, R. (2000). Investor Protection and Corporate Governance. Journal of Financial Economics, 58 (1-2), pp. 3-27.

Lazonick, W. & O’Sullivan, M. (2000). Maximizing Shareholder Value: A New Ideology for Corporate Governance. Economy and Society, 29 (1), pp. 13-35.

Marr, B. (2004). Business Performance Management: Current State of the Art. Cranfield School of Management and Hyperion Solutions.

Mitton, T. (2002). A Cross-Firm Analysis of the Impact of Corporate Governance on the East Asian Financial Crisis. Journal of Financial Economics 64 (2), pp. 215-241.

Morin, R. & Jarrell, S. (2001). Driving Shareholder Value: Value-Building Techniques for Creating Shareholder Wealth. New York, NY: McGraw-Hill.

Moskalev, S. & Park, S.C. (2010). South Korean Chaebols and Value-Based Management. Journal of Business Ethics, 92 (1), pp. 49-62.

O'Byrne, S. (1996). EVA and Market Value. Journal of Applied Corporate Finance, 9 (1), pp.116-125.

Rappaport, A. (2005). The Economics of Short-Term Performance Obsession. Financial Analysts Journal, 61 (3), pp. 65-79.

Rappaport, A. (2006). Ten Ways to Create Shareholder Value. Harvard Business Review, 84 (9), pp. 66-77.

Romanek, B. & Lee, D. (2006). E-Communication to Shareholders outside the Offering Process. University of Toledo Law Review, 37 (2), pp. 387-402.

Ryan, H. & Trahan, E. (1999). The Utilization of Value-Based Management: An Empirical Analysis. Financial Practice and Education, 9 (1), pp. 46-58.

Shleifer, A., & Vishny, R. (1997). A Survey of Corporate Governance. Journal of Finance, 52 (2), pp. 737-789.

Stančić, P. (2006). Savremeno upravljanje finansijama preduzeća. Kragujevac: Ekonomski fakultet Univerziteta u Kragujevcu.

Stewart, B. (2003). How to Fix Accounting – Measure and Report Economic Profit. Journal of Applied Corporate Finance, 15 (3), pp. 63-82.

Strenger, C. (2006). Best Practice for Dealing with Non-Controling Shareholders – An Institutional Investor’s Perspective. OECD Policy dialogue 2006 – Corporate Governance in India. Retrieved from http://www.capital-governance-advisory.com/060223StrengerOECDIndia.pdf.pdf.

The World Bank. Doing Business 2011. Retrieved from http://www.doingbusiness.org/reports/global-reports/doing-business-2011/.

Todorović, M. (2010). Poslovno i finansijsko restrukturiranje preduzeća. Beograd: Centar za izdavačku delatnost Ekonomskog fakulteta u Beogradu.

Wet, J. & Toit, E. (2007). Return on Equity: A Popular, But Flawed Measure of Corporate Financial Performance. South African Journal of Business Management, 38 (1), pp. 59-69.

Worthington, A. & West, T. (2004). Australian Evidence Concerning the Information Content of Economic Value-Added. Australian Journal of Management, 29 (2), pp. 201-224.

Wright, M., Filatotchev, I., Hoskinsson, R., & Peng, M. (2005). Strategy Research in Emerging Economies: Challenging the Conventional Wisdom. Journal of Management Studies, 42 (1), pp. 1-33.

Yin, R. (2004). Case Study Research: Design and Methods. Thousand Oaks, CA: Sage Publications.

Young, M., Peng, M., Ahlstrom, D., Bruton, G., & Jiang, Y. (2008). Corporate Governance in Emerging Economies: A Review of the Principal–Principal Perspective. Journal of Management Studies, 45 (1), pp. 196-220.

Accounting and Audit Law, RS Official Gazette, Nos. 46/2006 and 111/2009.

Law on Companies, RS Official Gazette, No. 36/2011.

Law on the Capital Market, RS Official Gazette, No. 31/2011.