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Article
Publication date: 2 February 2010

S. Paulo

The purpose of this paper is to show that Hamada's equation, which is used operationally to evaluate changes in capital structure as a result of changes in financial…

697

Abstract

Purpose

The purpose of this paper is to show that Hamada's equation, which is used operationally to evaluate changes in capital structure as a result of changes in financial leverage, is subject to a number of non‐trivial deficiencies. Each of these deficiencies is of sufficient importance to nullify the fundamental purpose of this equation, render its function impossible, and epistemologically contradict its functioning. Moreover, to the extent that it is dependent on the empirically invalid capital asset pricing model (CAPM), Hamada's equation defies basic requirements of sound research methodology. Since it cannot do what it purports to do and is an operational fiction, it cannot assist directors with capital structure valuations in terms of Section 172 of the UK Companies Act of 2006. Further, if used operationally, is likely to contravene Section 807 §1348 of the Sarbanes‐Oxley Act of 2002.

Design/methodology/approach

A secondary survey of Hamada's equation, recent UK and US legislation and the literature of corporate financial management is undertaken in order to examine whether the fundamental purpose, function and functioning of this equation could validly and reliably achieve what it purports to achieve.

Findings

The derivation of Hamada's equation assumes perfect competition, yet to achieve its fundamental purpose and its function it is dependent on financial markets being inefficient and imperfectly competitive. Thus, its functioning requires a state that its mathematical derivation negates. Epistemologically, this equation is unsound, and since it is also dependent on an empirically invalid approach to the calculation of the cost of capital, the CAPM, Hamada's equation is an invalid valuation equation.

Originality/value

This paper shows that Hamada's equation defies basic requirements of sound research methodology, cannot assist directors with their duties in terms of Section 172 of the UK Companies Act of 2006 with regard to capital structure and financial leverage management, and is in conflict with Section 807 § 1348 of the Sarbanes‐Oxley Act of 2002.

Details

International Journal of Law and Management, vol. 52 no. 1
Type: Research Article
ISSN: 1754-243X

Keywords

Article
Publication date: 15 November 2011

Stanley Paulo

As a consequence of the global financial crisis and widespread disquiet over executive bonuses and other remuneration, in April 2009 the Financial Stability Forum…

1840

Abstract

Purpose

As a consequence of the global financial crisis and widespread disquiet over executive bonuses and other remuneration, in April 2009 the Financial Stability Forum enunciated principles for sound compensation as part of an effort to ensure the effective governance of compensation. The core problem this article seeks to address is the measurement of the contribution of corporate executives to the intrinsic value of the firm as part of an initial step in the process of implementing the Financial Stability Forum's principles. Unless the contribution of corporate executives can be measured in a manner that satisfies the requirements of sound research methodology, rigorous epistemology, and statutory requirements, it is doubtful whether these principles can be operationalized. Thus, the purpose of this paper is to show how the contribution of corporate executives can be estimated from audited financial statements. From the core problem and purpose of this article, its title is drawn.

Design/methodology/approach

Relevant sections of the report of the Financial Stability Forum 2009, the UK Corporate Governance Code of 2010, and the UK Companies Act of 2006, in conjunction with important reviews such as the Turner Review of 2009 and the Walker Review of 2009 were studied. Data inputs from audited financial statements were applied to appropriate well‐established non‐controversial valuation equations that are based on “first‐principles” of corporate finance, and the contribution of corporate executives to the intrinsic value of the firm was estimated in order to illustrate the validity of this approach.

Findings

The paper shows that contribution to the intrinsic value of the firm made by corporate executives can be measured in a non‐controversial and transparent way, and once done, can form the basis for quantifying executive remuneration on the basis of valued‐added. No attempt is made to address the fractional share of value‐added that should be placed in a bonus‐pool.

Originality/value

From an extensive survey of publicly available literature, there is no evidence to suggest that the measurement of the contribution of corporate executives to the intrinsic value of the firm, as part of an initial step in the process of implementing the principles of the Financial Stability Forum 2009, has yet been published.

Article
Publication date: 14 September 2010

Stanley Paulo

The purpose of this paper is to offer a viewpoint on the 1961 scientific method and research methodology used by Miller and Modigliani to derive the conclusion that…

2127

Abstract

Purpose

The purpose of this paper is to offer a viewpoint on the 1961 scientific method and research methodology used by Miller and Modigliani to derive the conclusion that dividends are irrelevant, with reference to the UK Companies Act of 2006, specifically Sections 829‐840 that concern distributions, and Section 172 that stipulates the duties of the directors in their promotion of the success of the company.

Design/methodology/approach

The relevant sections of the UK Companies Act of 2006 concerning distributions and the duty of directors to promote the success of the company were studied. It was followed by a detailed analysis of the article by Miller and Modigliani, in particular the purpose, assumptions, the 30 equations that comprise their model, and their interpretive logic in drawing conclusions from their equations.

Findings

In effect, Miller and Modigliani exclude dividends as a determinant of share value, side‐step the purpose of their research, do not state assumptions upon which their analysis and interpretations are reliant, and disregard the conceptual difference between income and capital. On the basis of their interpretive logic not only is the dividend decision irrelevant but so too is the financing decision and important aspects of company law. Nonetheless, the erroneous doctrinal view that is presented by Miller and Modigliani continues to have obstinately resolute adherents, as evidenced by its uncritical presentation in authoritative textbooks on financial management.

Originality/value

This paper's view is that the continued uncritical presentation of Miller and Modigliani cannot be justified as an approach consistent with sound research methodology.

Details

International Journal of Law and Management, vol. 52 no. 5
Type: Research Article
ISSN: 1754-243X

Keywords

Article
Publication date: 1 January 1976

PAULA F. SILVER

The thesis of this paper is that preparation programs for educational administrators would be vastly improved if available knowledge were systematically used in the…

Abstract

The thesis of this paper is that preparation programs for educational administrators would be vastly improved if available knowledge were systematically used in the design, management and study of the instructional programs. A review of the literature revealed that (1) conceptual and empirical knowledge have been rarely and inadequately discussed as foundations for program design; (2) management systems or technologies have not been discussed with reference to preparatory programs; (3) theoretical frameworks and sound research methodologies have been disregarded in most research about preparatory programs. Recommendations are made for increased knowledge utilisation in preparing educational administrators. Specifically suggested are: (1) implementation of various management technologies in departments of educational administration; (2) application of behavioral science theories and research methodologies to the study of existing preparation programs; and (3) use of theoretical and empirical knowledge to design and evaluate innovative preparatory programs. Suggestions regarding particular technologies pertinent to program management, specific theory‐based questions to guide research, and relevant bodies of knowledge applicable to program design are included. Conceptual systems theory is recommended as a foundation for programs designed to train “perceptive generalist” practitioners.

Details

Journal of Educational Administration, vol. 14 no. 1
Type: Research Article
ISSN: 0957-8234

Article
Publication date: 16 November 2010

S. Paulo

The purpose of this paper is to draw attention to the fact that the certainty equivalent coefficient net present value criterion, CEC(NPV), in disregarding a fundamental…

1269

Abstract

Purpose

The purpose of this paper is to draw attention to the fact that the certainty equivalent coefficient net present value criterion, CEC(NPV), in disregarding a fundamental requirement for the calculation of cash flows for purposes of discounted cash flow analysis, invalidates this capital budgeting criterion from the perspective of sound research methodology. The paper also investigates the impact of the UK Companies Act of 2006, the Sarbanes‐Oxley Act of 2002, and important reviews such as the Turner Review of 2009, the Walker Review of 2009, and the Review of the Combined Code of 2009 on this operationally invalid capital budgeting criterion, as well as its impact on the process of financial managerial decision making.

Design/methodology/approach

The CEC(NPV) as a discounted cash flow capital budgeting criterion was examined from the perspective of the axioms of cash flow estimation as well as from the definition of the cost of capital in order to ascertain the contribution of this criterion to financial management. The relevant sections of the UK Companies Act of 2006, the Sarbanes‐Oxley Act of 2002, the Turner Review of 2009, the Walker Review of 2009, and the Review of the Combined Code of 2009 were studied in order to establish whether the CEC(NPV) was able to satisfy the requirements of this legislation and these important reviews.

Findings

The CEC(NPV) is construct invalid and does not measure what it purports to measure: it over‐states financial viability. As a consequence, it does not meet the requirements of sound research methodology and therefore is at odds with the UK Companies Act of 2006, the Sarbanes‐Oxley Act of 2002, and falls foul of the Turner Review of 2009, the Walker Review of 2009, the 2009 Review of the Combined Code issued by the Financial Reporting Council. As such it cannot be endorsed by the Financial Services Authority.

Originality/value

The paper usefully shows that the CEC(NPV) denies financial managers application of Fisherian analysis for resolving conflicts in the rankings of mutually exclusive projects, and, the comparison of project cost of capital with their respective internal rates of return. Comparisons of the internal rate of return, not with the risk‐free rate (that is assumed to be a constant and which exhibits minimal variability in comparison with the cost of capital), but with the cost of capital cost of capital, are a sine qua non for managerial decision making, especially capital budgeting.

Details

International Journal of Law and Management, vol. 52 no. 6
Type: Research Article
ISSN: 1754-243X

Keywords

Article
Publication date: 18 May 2010

S. Paulo

The purpose of this article is to investigate whether economic value added (EVA®) is a superior financial performance metric and creates market value added (MVA), as…

1954

Abstract

Purpose

The purpose of this article is to investigate whether economic value added (EVA®) is a superior financial performance metric and creates market value added (MVA), as claimed by Stern Stewart and Company, and therefore is consistent with the purpose and intent of the UK Companies Act of 2006 and the Sarbanes‐Oxley Act of 2002. If these claims can be sustained, then it could be argued that this valuation metric should form part of the Business Review, Section 417 of the UK Companies Act of 2006, and furthermore it could be an appropriate approach to the attainment of the corporate objective of the UK Companies Act of 2006, Section 172(1).

Design/methodology/approach

A survey was undertaken of journal articles published in mainstream academic journals from 1997 to 2008 that investigated the claims of Stern Stewart and Company that EVA® was a superior financial performance metric vis‐à‐vis other well‐established accounting and financial metrics. As the empirical evidence in support of these claims was not compelling, the epistemology and methodology of EVA® were examined, and were found to be deficient.

Findings

There is insufficient supportive evidence to validate the claims of EVA®; furthermore, from the perspective of epistemology and sound research methodology it is not possible to make a robust case for the unqualified use of EVA® in jurisdictions where the UK Companies Act of 2006 and the Sarbanes‐Oxley Act of 2002 apply. Directors who make unqualified use of this financial performance metric place themselves at unnecessary risk.

Originality/value

There is no evidence from the scrutiny of publicly available secondary sources to indicate that the implications of the UK Companies Act of 2006 and the Sarbanes‐Oxley Act of 2002, for the use of the financial performance valuation metric, EVA®, has been previously undertaken or published.

Details

International Journal of Law and Management, vol. 52 no. 3
Type: Research Article
ISSN: 1754-243X

Keywords

Book part
Publication date: 23 September 2009

Michael W. Stebbins, Judy L. Valenzuela and Jean-Francois Coget

Since 1973, the pharmacy operations division of the Kaiser Permanente Medical Care Program (KPMCP) has used long-term action research programs as the principal method for…

Abstract

Since 1973, the pharmacy operations division of the Kaiser Permanente Medical Care Program (KPMCP) has used long-term action research programs as the principal method for orchestrating change. This chapter covers the evolution of action research theory within large, complex organizations, with particular attention to health care organizations. Four case examples from KPMCP are discussed in depth and mapped to the recently advanced Roth model of insider action research. This model considers external and internal business context, the perceived need to create new organizational capabilities, as well as insider action research theory and learning mechanisms used in change programs. Issues posed by the Roth model are explored, and new theory is advanced regarding the need for a long-term perspective, the advantages and difficulties posed when managers act as insider action researchers, and the quality of data gathering that takes place during insider action research change programs.

Details

Research in Organizational Change and Development
Type: Book
ISBN: 978-1-84855-547-1

Abstract

Details

The Ultimate Guide to Compact Cases: Case Research, Writing, and Teaching
Type: Book
ISBN: 978-1-80382-847-3

Article
Publication date: 29 April 2014

Garry D. Carnegie

The purpose of this paper is to examine the historiographic writings for accounting concerned with the craft of researching and writing history, published in the…

1391

Abstract

Purpose

The purpose of this paper is to examine the historiographic writings for accounting concerned with the craft of researching and writing history, published in the English-language, across a period of 30 years from 1983 to 2012. The study's aim is three-fold: first, to review the literature pertaining to the writing of accounting history and to identify key developments and trends; second, to identify the contributors to this literature and their publication outlets and third, to analyze citations to identify individuals or groups who have gained traction in accounting historiography.

Design/methodology/approach

An essay focusing on developments in the accounting historiography literature as well as a review of some key thoughts or issues in present-day accounting historiography.

Findings

The study shows that a key development in the accounting historiography literature during this period has been the advent of new accounting history, which has contributed much theoretical and topical diversity in historical accounting research and an acceptance of the role of oral history as a means of expanding the archive.

Research limitations/implications

The present study, with its focus on contributions on the craft of researching and writing history, does not itself examine actual research studies which have been undertaken on accounting's past across the same period of time.

Originality/value

The study may assist in making the contributions examined more generally assessable and comprehensible to researchers to both explore and re-explore and may even contribute to the development of further contributions on accounting historiography to guide the approaches to, and direction of, historical accounting research in future.

Details

Accounting, Auditing & Accountability Journal, vol. 27 no. 4
Type: Research Article
ISSN: 0951-3574

Keywords

Article
Publication date: 1 September 1997

Johan de W. Bruwer

Tenants generate the income for a shopping centre and the value of this type of retail property to the property owner or landlord thus depends on the forecast of consumer…

4240

Abstract

Tenants generate the income for a shopping centre and the value of this type of retail property to the property owner or landlord thus depends on the forecast of consumer demand for the products or services sold by tenants. Through balanced tenancy, the stores in a planned shopping centre complement each other in the quality and variety of their product offerings, and the kind and number of stores are linked to the overall needs of the surrounding population in the centre’s catchment areas. Whereas there is frequent reference in retailing literature to the importance of tenant mix for shopping centres, published research about the so‐called “ideal” tenant mix is almost non‐existent. Aims to rectify this situation partially and suggests a practical research method using a consumer preference weighting methodology based on three parameters, namely tenant category preference, tenant category ranking preference, and tenant shopping likelihood, consolidated into a single composite tenant choice index. The emphasis is on describing the logic of the research methodology, using a real‐life example of a planned‐to‐be‐erected shopping centre in South Africa, but due regard is given throughout to the relevant theoretical underpinnings in order to also contribute to this aspect of the young science.

Details

Property Management, vol. 15 no. 3
Type: Research Article
ISSN: 0263-7472

Keywords

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