Value-based management at DAX-listed companies

Bachelor Thesis, 2011

81 Pages, Grade: 1,7


Table of Contents

List of Abbreviations

List of Figures

List of Tables

1. Introduction
1.1 Problem Definition
1.2 Objectives
1.3 Scope of Work

2. Concepts of value-based management
2.1 Reasons for the existence of value-based management
2.2 Cost of Capital
2.2.1 Weighted Average Cost of Capital
2.2.2 Cost of debt
2.2.3 Cost of equity Capital Asset Pricing Model Arbitrage Pricing Theory Dividend Discount Model
2.3 Corporate valuation
2.3.1 Cash flow accounting
2.3.2 Discounted Cash Flow methods Basic concept Entity and equity method
2.4 Value-oriented key figures
2.4.1 Types of value-oriented key figures
2.4.2 Economic Value Added Basic concept Net Operating Profit after Taxes Net Operating Assets Conversions
2.4.3 Return on Capital Employed
2.4.4 Cash Flow Return on Investment
2.4.5 Cash Value Added

3. Analysis of concepts used at DAX-listed companies
3.1 Companies publishing only little information
3.2 Companies using profit-based concepts of residual earnings
3.2.1 Siemens
3.2.2 RWE
3.2.3 E.ON
3.2.4 Allianz and Munich Re
3.2.5 Metro
3.2.6 ThyssenKrupp
3.2.7 Henkel
3.2.8 Daimler
3.2.9 Volkswagen and MAN
3.2.10 BASF and Deutsche Post
3.3 Companies using only the ROCE or similar key figures
3.3.1 Linde
3.3.2 Fresenius and Fresenius Medical Care
3.3.3 Infineon and BMW
3.4 Companies using CFROI and CVA
3.4.1 Lufthansa
3.4.2 Bayer
3.5 Evaluation of the analysis

4. Conclusion
4.1 Target achievement
4.2 Outlook


List of Abbreviations

illustration not visible in this excerpt

List of Figures

Figure 1: Capital Market Line

Figure 2: Security Market Line

Figure 3: Factors influencing the cost of equity

Figure 4: Arbitrage Pricing Model

Figure 5: Free Cash Flow calculation

Figure 6: Calculation of equity and entity method

Figure 7: Calculation of Net Operating Profit after Taxes

Figure 8: Calculation of Net Operating Assets

Figure 9: Spectrum of EVAs

Figure 10: Concept of the Internal Rate of Return

Figure 11: Calculation of the operating result at RWE

Figure 12: Value-oriented key figures at ThyssenKrupp

Figure 13: Components of the value added at Daimler

Figure 14: Calculation of the capital invested at Volkswagen

Figure 15: Operating assets and invested capital at Fresenius

List of Tables

Table 1: Types of value-oriented key figures

Table 2: Value-oriented key figures of DAX-listed companies

Table 3: Pure rates and market risk premiums of 2009

1. Introduction

1.1 Problem Definition

The idea of value-based management dates back to the 1st century AD when a Roman author pointed out that before writing about the planting of wine grapes, it is necessary to figure out whether the return of wine-growing exceeds the usual interest rate which a borrower had to pay.1 Anyway, traditionally the corporate success is calculated using accounting figures which focus on the company’s profit. To compare different companies, relative key figures are used such as the Return on Equity (ROE).2 Studies, however, have shown that there is only little correlation between the actual return of equity investors and key performance figures of the accounting.3 One typical reason for the finding that profit is an unreliable indicator of the investor’s added value consists in the fact that it does not include the risk which the investors had to take. It can be included as the cost of equity capital. Moreover, the underlying data is past-oriented and different ways of depreciation and inventory valuation influence profits without changing payment flows.4

In the last decade, more and more companies have implemented concepts of value- based management which offer a solution by describing a way to measure the development and performance of a company. The aim is maximizing the company’s market value instead of directly maximizing the profits. Its shareholder value orientation makes the figures of value-based management key performance indicators which include the element of risk which is left out by classical key performance measurements like the Return on Equity or the EBIT. This integration of both yield and risk makes value-based figures superior to classical key measurements. Especially in an environment of globalized capital markets, the competition for capital is becoming stronger. A value-based management approach concentrates on the key corporate aim of increasing the shareholder value sustainably and permanently.5 Thereby it is different from the first shareholder value concepts which already came from the USA to Germany in the late 1980s but fell into disrepute because of their one-sided and short term orientation towards an increase of the stock price.6 In the last decade value-based management has become an integral part of the management instruments of especially listed companies. According to a study of KPMG in 2003, 97% of all companies listed in the DAX 1007 committed themselves to the introduction of a Shareholder Value key measurement for value based management. Nevertheless there is no standard way of implementation. This is why the thirty companies listed in the most important German stock index DAX use different methods and key measurements. Consequentially there has not yet been found a unique answer to the question which asks for the best way to determine the net increase in value of a company when the cost of capital for both equity capital and debt capital is taken into consideration.

1.2 Objectives

Especially listed companies measure their performance using value-based key figures which are also applied for planning and the incentive system. To analyze the concepts of value-based management implemented by DAX-listed companies, it is necessary to understand the underlying theoretical background first. That includes the assessment of the methodology of corporate valuation and the awareness of the variables which influence its outcome as well as the examination of ways to calculate a company’s cost of capital according to the company’s risk in detail. This thesis focuses on discussing and comparing the most common value-oriented key figures in literature and practice. The emphasis is on answering the question for the concepts which are used by DAX- listed companies. As the concepts are not standardized, the application is made very different at the companies examined. Only available published data is considered, especially from the annual reports. In the course of the analysis, the differences in the calculation of the figures are a central aspect which is worked out to check in which ways the concepts were implemented. Especially the calculation of the cost of capital, which is an essential element of all value-based concepts, is part of the analysis to find out about significant differences in the approaches used. Furthermore, the functions of the implemented concepts at the companies are identified like the existence of value- based incentive systems. As capital has become an even more scarce resource in a globalized world, the elaborateness of the reported concepts allows conclusions about the importance a company attaches to a long-term and sustainable increase in its corporate value.

1.3 Scope of Work

The thesis is divided into two main parts. In the first part, the theoretical background of value-based management is explained in detail. First, the reasons are pointed out why traditional key figures are not suitable to measure the corporate success and as a result, why value-based concepts are used. Subsequently, the methodologies for the determination of a company’s cost of capital and for corporate valuation are presented in detail. The consideration of both the cost for equity capital and debt capital add the element of risk to determine the actual performance. This knowledge is the basis for multi-period value-based planning. Secondly, the most common approaches based on this theoretical background are introduced and elaborated. They integrate the key target of increasing the corporate value sustainably in the long term as a business philosophy which creates a holistic framework of action for the diverse tasks within a company.

The second part brings to light, which companies of the thirty companies listed in the DAX are reporting a value-based management approach and further, which approaches these companies have implemented. As the parameters on which the calculation is based differ and are defined in different ways by the companies analyzed, these figures are surveyed. Even though not all companies which are using a value-based approach do report information about it in their annual reports or in other publications, especially the annual reports give information about the extent of spread.

Literature is taken into account up to January 1, 2011. The two last annual reports including IFRS financial statements are considered for the analysis which were published by all companies listed in the DAX at that date.

2. Concepts of value-based management

2.1 Reasons for the existence of value-based management

Classical key measurements like the ROE are not sufficient for corporate management because the traditional ascertainment of profits on which they are based only includes the cost of debt. Value-based management approaches in contrast deduct imputed interests for the total capital because only by doing so it can be evaluated if there has been an increase in value for the shareholders.8

There are internal and external reasons for the existence of value-based management approaches. Internal reasons point out the limited internal informative value of classical key measures whereas external reasons deal with the stakeholders who are interested in whether the company creates value. There are five major deficits of traditional figures:9

a) Traditional figures are balance-oriented. Therefore, they are easily influenceable by specific accounting policies as well as by relief and tolerance in accounting rules which can lead to unequal profits although payment flows stay the same.10
b) The principal agent relationship of the shareholders and the managing board intensifies this problem as the different interests lead to a motivation for the managing board to influence the key measurements to their own benefit.
c) Moreover these traditional figures only focus on one specific past fiscal year without including any outlook. As the future development determines the corporate value, the profit of the past does not answer questions concerning the value of a company.11
d) This backward orientation is one of the reasons why the capital market orientation of traditional figures is strictly limited. The announcement of future projects (e.g. R&D) often leads to much greater effects on the share price than the publishing of the annual financial statement does.12
e) The most important deficit consists in the isolated consideration of yield and risk.13 The classical figures only measure the yield but completely leave out the risk which is essential for an evaluation of the return expected by the shareholders. This leads to inefficient investment decisions as investment alternatives are only contrasted in regards to their expected returns.14

The implementation of concepts of value-based management has three main functions.15 First, it supports the value oriented planning. If the management is provided with company specific concepts of capital costs as well as with information about financial consequences of certain decisions with long term effects, it can increase the company’s value by a target oriented planning. Second, it supports the value oriented control. By indentifying value oriented figures in a period and comparing them to a benchmark or planned figure, it helps to realize the planned aims and to go against undesirable development in time. Third, it supports value oriented incentive systems. The planned value figures have to be implemented into an incentive system to arrange result-oriented leadership which leads to the right decision incentives for executives.16

2.2 Cost of Capital

2.2.1 Weighted Average Cost of Capital

Investors expect to receive a risk-adequate compensation for the capital which they provide a company with. Generally providers of debt expect interest payments and providers of equity expect dividends or price gains. All together these expected compensations are called cost of capital. They arise from respective alternative investments and refinancing possibilities of the providers of capital at the capital market considering risk aspects.17 A company is only successful in creating value if it generates a return which is greater than the cost of capital. When the cost of capital is permanently not obtained, the investors will withdraw and invest their capital in a better alternative.18 The risk adjusted cost of capital is calculated as the weighted average of the cost of equity and the cost of debt. This Weighted Average Cost of Capital (WACC) represents the minimum return of any investment and the average cost of financing, irrespective of the source of the capital.19 It can be expressed as follows:20

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The cost of equity (iE) and the cost of debt (iD) are weighted with their respective share of the capital in the company’s target capital structure. For the calculation of these shares the market values should be used instead of the book values as a competitive return has to be generated on the current market values of equity and debt capital.21 The shares are assumed constant throughout one period.22 The target capital structure often differs from the actual current capital structure and should be identified as the long term optimal structure in regards to a maximized stock price.23 Only this structure exactly represents the real enterprise value. In practice, the optimal structure is mostly determined by comparative values of other listed companies. A problem of the WACC consists in circular references as the market values of equity and debt which are calculated by the WACC have to be given for its calculation.24

As the interest expenses for debt capital are tax deductable to a corporate taxpayer, the after-tax WACC differs from the above described pre-tax WACC.25 Therefore the calculation of the cost of debt in the formula of the after-tax WACC has to be amended by a factor which takes the profit tax rate into account:

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Which of both calculations of WACC is used depends on the company’s consideration of the taxes concerned in the income recognition.26 Both the cost of equity and the cost of debt can be calculated in various ways.

2.2.2 Cost of debt

As the providers of debt receive contractually fixed compensations, it is relatively easy to determine the cost of debt. Trade payables and other interest-free short term liabilities are not considered for the calculation of the cost of debt.27

In general there are two possibilities how to calculate the cost of debt. It can either be determined based on the actual current costs for the borrowed capital referring to credit contracts or bond conditions or based on current comparable capital market interest rates.28 The latter case should be preferred from a theoretical point of view because it pays attention to the opportunity costs.29 The comparability has to be given concerning the dimensions of currency, credit rating and maturity. The company’s cost of debt consists of an assumed risk-free interest rate and a risk premium which reflects the additional risk of the company compared to a risk-free investment.30 Concerns often decide on calculating their cost of debt according to their long term financing conditions to have a constant rate which does only change occasionally when events occur which considerably influence the cost of debt.31

As already mentioned, the interest payments for debt capital are tax deductable leading to a correcting advantageous factor for the company which is called tax shield.32 The profit tax rate is needed and used to consider the tax shield. This rate can either be an actual weighted average rate for the company or a constant calculative rate reflecting an average historical or forecasted rate.33

2.2.3 Cost of equity Capital Asset Pricing Model

The key element of the capital market theory, the Capital Asset Pricing Model (CAPM), is the most commonly used method to determine the yield expected by investors for the assumption of specific risks.34 The CAPM is useful to calculate a company’s cost of equity capital as this is equal to the investor’s expected yield.

A capital market balance is assumed by the model which includes three main premises. First, the CAPM is based on the assumptions of the portfolio theory35. Therefore the capital market is assumed to be a perfect market and all market participants are assumed to act according to the portfolio theory. They are risk-averse and consequently only invest in efficient portfolios. Second, the existence of a risk-free interest rate is presumed at which capital can be invested and borrowed without any limit. This risk- free interest rate (iRF) is called pure rate and is less than the yield of the lowest-risk securities portfolio. Third, all market participants share homogeneous expectations concerning risk and return of all securities.36

Given the above, all efficient portfolios only include investments in the pure rate (RF), in the market portfolio (M) or in a combination of both. A portfolio can be named efficient if there is no other portfolio which has a higher expected yield at the same risk. The possibility to borrow capital at the pure rate constitutes further efficient portfolios (e.g. C) with a higher risk and a higher expected yield which invest the given capital plus other borrowed capital in the market portfolio. An investor chooses one of these portfolios according to his personal willingness to take on risks.37 These efficient portfolios are visualized by the Capital Market Line showing that there is a proportional correlation between risk and the expected yield.

illustration not visible in this excerpt

Figure 1: Capital Market Line38

All portfolios on the capital market line are efficient as the market portfolio consists of all securities which are fraught with risk and traded at the market, proportional to their market values. This targeted diversification eliminates the unsystematic risk. As a consequence investors do not have to take this risk and it is not recompensed at the capital market. Unsystematic risks are individual risks of a company which can e.g. be caused by management errors. On the contrary, the systematic risk cannot be eliminated by means of diversification.39 Thus, the risk of the market portfolio is equal to the systematic risk of the total market. One typical systematic risk is the economic cycle risk which makes the return of the market portfolio insecure.40

As the capital costs of a company reflect the risk that investors estimate to be connected with a financial engagement in that company, a risk measure is needed to determine these costs. In the CAPM, this standardized risk measure which quantifies the company’s systematic risk is called Beta (β). It expresses the correlation between one specific security and the market portfolio.41 The more sensitive the return of a security reacts to cyclical fluctuations in comparison to the return of the market portfolio, the higher is Beta. From this it follows that a higher value of Beta indicates a higher systematic risk of the security concerned. By definition, the value of Beta for the market portfolio is equal to 1 and the value of Beta for a risk-free investment is equal to 0. If a security reacts more sensitive to cyclical influences, its value of Beta is greater than 1 (B). Contrariwise, the value of Beta is less than 1 for securities which react less sensitive to changes than the market portfolio does (A).42 As the market portfolio does not exist in reality it is in practice represented by a stock market index in the calculation.43 Mathematically the value of Beta is determined by the result of the covariance between the return of the company’s stock and the return of the market portfolio divided by the variance of the market portfolio:44

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The illustration below shows the Security Market Line which visualizes the relationship between the value of Beta as a risk measure and its yield.

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Figure 2: Security Market Line45

Formally, the corresponding equation of the Security Market Line for a security S is:46

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An investor consequentially expects a return (rS) for his capital given as equity capital to a company amounting to the sum of the pure rate and a risk premium.47 This premium is calculated as the product of the market risk premium and the individual value of Beta for the company. The return which investors expect to achieve equals the company’s cost of equity.48

The following diagram shows the different factors influencing the cost of equity:

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Figure 3: Factors influencing the cost of equity49

As the assumptions of the CAPM do not hold true in reality, critics call its results into question. Actually neither a risk-free interest rate nor a market portfolio exists nor does the capital market fulfill the requirements of a perfect market as e.g. transaction costs exist and the traded stocks are not arbitrarily divisible.50 Furthermore the interest rates of very low risk investments like a German government bond are lower than those charged for borrowing money. Expectations about the return and risk of securities also differ among the investors. But even though the CAPM does not reproduce the investors’ behavior true-to-life, it is a logically consistent model to obtain information about the relationship between risk and return resulting in the possibility to calculate the cost of equity of a company. Arbitrage Pricing Theory

The Arbitrage Pricing Theory (APT) can be regarded as a multi-factor alternative to the CAPM to determine the expected yield of securities. The relationship of risk and return is not tried to analyze based on the portfolio theory but based on a full model of arbitrage, the Arbitrage51 Pricing Model. The APM determines a listed company’s risk adjusted cost of equity based on the assumption that the yield that is expected by investors depends on multiple systematic factors, on one unsystematic factor and on the risk-free interest rate. Formally it is:52

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A security’s cost of equity (rS) is calculated as the sum of the risk-free interest rate (iRF) and of various (k) expected excess returns (E) of portfolios which only depend on one independent factor (F) each. Each of these expected returns is weighted by the value of Beta (β) which expresses the sensitivity of the security’s return towards the factor concerned. The systematic risk is consequentially divided into separate factors.53 Empirical research has shown that the APM better explains the yields expected than the one-factor model CAPM and that the following five basic factors are sufficient:54

a) The index of industrial production which measures the performance of an economy in regards to the industrial production of goods.
b) The short term real interest rate which equals the difference between treasury bills and the consumer price index.
c) The short term inflation which is assessed by unexpected changes of the consumer price index.
d) The long term inflation, calculated as the difference between the current yields of long term and short term government bonds.
e) The risk of default which is measured as the difference between the yields of long term corporate bonds with a rating of AAA and a rating of BAA55.

The following illustration visualizes the APT at a simplified example of two factors:

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Figure 4: Arbitrage Pricing Model56

The portfolios which lie on the same diagonal line share the same expected yield although the two systematic risks are allotted divergently and compensate each other. Portfolios A and B are independent from changes in both factors and consequentially achieve the risk-free interest rate. Unlike the CAPM, the APM describes more than one portfolio which has the expected yield of the market portfolio as the different risks can be combined in different ways constituting various portfolio options which are exposed to the risks in varying intensities.57 As the APM is a non-standardized model in quite an early stage of development, it is rarely used by companies yet. The selection of suitable risk factors which has not been completed yet is crucial for its successful application.58 Dividend Discount Model

The Dividend Discount Model (DDM) was originally designed to determine the value of a company. It is mainly used in the USA as one further alternative to calculate the cost of equity. It is based on the idea that the price of any security equals the sum of all future payments discounted at the present value.59 Consequentially the value of a security is determined by the profits the company will generate and pay to its shareholders in the form of dividends in the future. The formal expression for the current stock price (S0) equaling the sum of all discounted future dividend payments (D) is as follows:60

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The discount rate (rS) represents the expected yield by the investors. Assuming a company which pays dividends (D) growing by a constant rate (g) to its shareholders as a part of the profits is retained, it follows:61

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The model requires a forecast of the future dividend payments respectively of their growth rate. Even small changes in the dividend growth rate result in significant changes in the cost of equity. Mostly this estimation is hard to do reliably. Another problem consists in the fact that the risk is not explicitly included in the model. The main advantage of the model and the reason why many companies use it internally is that the calculation is relatively easy and requires only very limited methods of finance mathematics.

2.3 Corporate valuation

2.3.1 Cash flow accounting

In general there are two ways of valuating a company. The valuation can either be based on the individual current assets and liabilities or on the future profits the company can generate as a whole.62 The latter method is preferable as an investor benefits from the future ability of a company to generate profits for its providers of equity, not from its current financial circumstances. To quantify this ability, the cash flow is used instead of profits as the cash flow cannot be influenced by accounting policies. This figure includes all transactions on a value basis which influence both liquidity and the income statement and therewith equals the payments received minus the disbursements affecting net income.63 This liquidity surplus can be used for investments, debt redemptions and dividend payments. It can be calculated in a direct or indirect way. The direct calculation contrasts all of the transactions mentioned and derives the liquidity surplus. In contrast, the indirect calculation starts with the annual net profit adding all expenses and deducting all income items which have no effect on liquidity, e.g. depreciation is added and provisions which were recognized as income are deducted. Even though both ways end up in the same result, the direct calculation is preferable as it is more precise and meaningful but only possible with internal data. The cash flow statement according to IFRS shows the liquidity development of one period including all payments received and disbursements. It is divided into three parts and extends the concept of the described cash flow accounting reducing it to only one part of the total cash flow, the cash flow from operating activities. The second part, the cash flow from investing activities, covers all investments and disinvestments whereas the third part, the cash flow from financing activities, includes all payments involving the shareholders or providers of debt.64 Examples for such payments are borrowing, loan repayments, dividend payments and capital increases.

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Figure 5: Free Cash Flow calculation65

The financial benefit which is generated by the company’s business activity equals the cash flow from operating activities minus the already disposed elements of profit tax payments and net capital expenditure. The result is called Free Cash Flow (FCF) which is useful for a corporate valuation based on the future ability to generate profits for the company’s providers of equity. An all-equity financed company is assumed by the calculation of the FCF as it does not consider the tax shield. Consequentially the interest payments have to be added when the FCF is calculated indirectly.66

2.3.2 Discounted Cash Flow methods Basic concept

The Discounted Cash Flow methods (DCF methods) are common approaches to determine a company’s value based on its expected future Free Cash Flows and are used as multi-period value-based methods for planning.67 These forward-looking methods are based on the two basic principles of the dynamic investment appraisal stating that the value of money decreases over time and that secure investment returns are more worthy than risky ones. The methods moreover are premised on the idea of the corporate value as a function of the future payouts to the shareholders. The aim of increasing this value is a key control element of most concepts of value-based management. The term of DCF methods covers various different methods which are subsumed under it and all result in the same corporate value considering a set of assumptions.68 All of these methods have in common that they use the present value of the future FCFs for their calculation.69 Corresponding to the dynamic investment appraisal, the FCFs are discounted to their current value and in sum equal the corporate value. A figure representing the costs of the corresponding capital is used as discount factor to exclude the cost of capital from the corporate value.70 Only the profit tax payments by the company are integrated in the approaches but not the taxes the providers of capital have to pay on the company’s payouts.71 The two basic approaches are the equity method and the entity method. Their different ways of calculation are shown in the following illustration:

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Figure 6: Calculation of equity and entity method72


1 See Stelter, D. (1998), p. 208.

2 See Bruhn, M., Baitsch, C. (1998), p. 393.

3 See Rumpf, B.-M. (1994), p. 127.

4 See Rappaport, A. (1998), p. 17.

5 See Ogrzewalla, F. (2007), p. 2.

6 See Velthuis, L. J. (2005), p. 1.

7 The DAX 100 included all companies of DAX and MDAX. As the MDAX was reduced to 50 companies, the DAX 100 was replaced by the HDAX which includes all companies of DAX, MDAX and TecDAX. See Linder, H. G., Tietz, V. (2008), p. 135.

8 See Hostettler, S. (1997), p. 40.

9 See Britzelmaier, B. (2009), p. 16.

10 See Schaffer, C. (2005), p. 5.

11 See Bruhn, M., Baitsch, C. (1998), p. 393.

12 See Rappaport, A. (1998), p. 15.

13 See Weber, J. et al. (2004), p. 43.

14 The application of absolute return figures leads to overinvestment as the capital costs are not considered whereas the application of relative return figures leads to underinvestment as investments with a return lower than the target return are not realized although potentially increasing the shareholder value. Both therefore do not help increasing the corporate value. See Velthuis, L. J. (2005), p. 28.

15 See Arbeitskreis Internes Rechnungswesen der Schmalenbach-Gesellschaft (2010), p. 800; Velthuis, L. J. (2005), p. 11.

16 See Schaffer, C. (2005), p. 10.

17 See Arbeitskreis Internes Rechnungswesen der Schmalenbach-Gesellschaft (2010), p. 799.

18 See Rappaport, A. (1998), p. 12.

19 See Besley, S., Brigham, E. F. (2008), p. 485; Bruhn, M., Baitsch, C. (1998), p. 399.

20 See Preißler, P. R. (2008), p. 111.

21 See Rappaport, A. (1995), p. 59.

22 See Wöhe, G. (2002), p. 659.

23 See Ehrhardt, M. C., Brigham, E. F. (2010), p. 358.

24 See Pratt, S. P., Grabowski, R. J. (2010a), p. 197.

25 See Pratt, S. P., Grabowski, R. J. (2010b), p. 373.

26 See Arbeitskreis Internes Rechnungswesen der Schmalenbach-Gesellschaft (2010), p. 811.

27 See Pape, U. (2010), p. 112.

28 See Bruhn, M., Baitsch, C. (1998), p. 399.

29 See Copeland, T. E. et al. (2002), p. 271.

30 See Wöhe, G. (2002), p. 659.

31 See Arbeitskreis Internes Rechnungswesen der Schmalenbach-Gesellschaft (2010), p. 812.

32 See Weber, J. et al. (2004), p. 48.

33 See Arbeitskreis Internes Rechnungswesen der Schmalenbach-Gesellschaft (2010), pp. 812 - 813.

34 See Wöhe, G. (2002), p. 771.

35 For more information about the portfolio theory, see e.g. Hagenloch, T. (2007), pp. 177 - 203.

36 See Rebien, A. (2007), p. 56.

37 See Hagenloch, T. (2007), p. 211.

38 According to: Hagenloch, T. (2007), p. 210.

39 See Franke, G., Hax, H. (2004), p. 353.

40 See Schmeisser, W. et al. (2008), p. 125.

41 See Weber, J. et al. (2004), p. 54.

42 See Hagenloch, T. (2007), pp. 213 - 214.

43 Examples for stock market indices are the DAX or the Dow Jones index. For the problem of choosing a suitable index, see Lang, A. J. (1993), pp. 648 - 650.

44 See Pape, U. (2010), p. 87.

45 According to: Hagenloch, T. (2007), p. 221.

46 See Herbertinger, M. (2002), p. 72.

47 See Schacht, U., Fackler, M. (2009), p. 320.

48 See Schmeisser, W. et al. (2008), p. 126.

49 According to: Pape, U. (2010), p. 128.

50 See Rebien, A. (2007), p. 66.

51 Arbitrage means stock exchange transactions which aim at the realization of profits by taking advantage of price differences at different stock exchanges. See Gabler Verlag (2010a), p. 1.

52 See Britzelmaier, B. (2009), p. 81; Rebien, A. (2007), p. 101.

53 See Copeland, T. E. et al. (2002), pp. 277 - 278.

54 See Copeland, T. E. et al. (2002), p. 277; Meyer, R. (2009), p. 20.

55 According to the rating methodology of Moody’s Corporation. The range from AAA to BAA is called ‚Investment Grade‘. These bonds are judged solid and allowing banks to invest in them. See Moody’s Investors Service (2010), pp. 4 - 9.

56 According to: Copeland, T. E. et al. (2002), p. 278.

57 See Hagenloch, T. (2007), pp. 219 - 220.

58 See Pape, U. (2010), p. 128.

59 See Spremann, K. (2004), p. 64.

60 See Barker, R. (2001), p. 19.

61 See Britzelmaier, B. (2009), p. 88.

62 See Schmeisser, W. et al. (2008), p. 118.

63 See Britzelmaier, B. (2009), p. 28.

64 See Pape, U. (2010), p. 104.

65 According to: Weber, J. et al. (2004), p. 48.

66 See Weber, J. et al. (2004), p. 48.

67 See Schmeisser, W. et al. (2008), p. 132.

68 For an overview of these assumptions, see Ballwieser, W. (1998), p. 82.

69 See Weber, J. et al. (2004), p. 45.

70 See Hagenloch, T. (2007), pp. 92 - 93.

71 See Weber, J. et al. (2004), p. 46.

72 According to: Pape, U. (2010), p. 95.

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Value-based management at DAX-listed companies
University of Applied Sciences Essen
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Wertorientierte Unternehmensführung, EVA, Economic Value Added, CFROI, Cash Flow Return on Investment, DAX
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Alexander Görke (Author), 2011, Value-based management at DAX-listed companies, Munich, GRIN Verlag,


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Title: Value-based management at DAX-listed companies

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