Questions in the field of group control are increasingly important in today’s economic environment. This development is especially driven by the fact that almost 90% of the German public companies and around 50% of the German limited liabilities companies are organized as groups. These structures imply information asymmetries and higher coordination requirements because commonly the parent company is responsible for strategic decisions while the subsidiary is responsible for the operations. As decentralized structures are gaining importance and the complexity of the company’s environment is growing, the group control faces new challenges and increasing importance for the management. In its aim to supply rationality assurance to the management it needs to work effective and efficient using a set of control tools. The basic data can be retrieved internally or externally. Especially, in the case of listed subsidiaries the data provided by capital markets seem to be a very simple solution for the problem of information gathering and processing in a complex environment. Hence the following research questions arise: How can a holding control its listed subsidiaries through data from capital markets?
What could be rationality deficits and limitation in the application of data from capital markets? Beginning with basic definitions the paper defines management control to lay the basis of the examination and to determine the point of view. The holding is the entity that group control is located in. Capital market data in group control is the theme of this paper and those two terms need to be defined properly. Group control is defined in respect to rationality assurance, so it must be distinguished between external and internal institutions of rationality assurance. The internal institution includes a description of the functions and tasks of the controller. Control instruments are the tools used by the controller to process capital market data in group control. The main part is assessing the theory of the utilization of capital market data in group control. The first step is to ex-amine the aims of the application of capital market data, which are effectiveness and efficiency. In the second step different forms of application of capital market data in group control are assessed by looking at selected control instruments. They are grouped by their employment in the tasks of the controller, which are information, planning and control, and coordination. [...]
Table of Contents
1 Introduction
1.1 Problem definition and objectives
1.2 Outline
2 Basic Definitions
2.1 Management control defined as rationality assurance
2.2 Holding structures
2.3 Capital market data
2.3.1 Sources of capital market data
2.3.2 Implications of the imperfect capital market on its data
2.4 Group control in respect to rationality assurance
2.4.1 Rationality assurance by external institutions
2.4.2 Rationality assurance by internal institutions
2.5 Definition of control instrument based on capital market in group control
3 Theory of the usage of capital market data in group control
3.1 Aims of the application of capital market data in control instruments
3.1.1 Effectiveness
3.1.2 Efficiency
3.2 Forms of application of capital market data in group control
3.2.1 Information task
3.2.2 Planning and control task
3.2.3 Coordination task
3.3 Critical view on rationality deficits of capital market data in group control
4 Empirical evidence of the usage of capital market data in group control
5 Conclusion
Objectives and Core Themes
This seminar paper examines the integration of capital market data into group control systems for listed subsidiaries, aiming to determine how such data can enhance the effectiveness and efficiency of management control while identifying potential rationality deficits and limitations. The analysis evaluates how holdings can utilize market-derived information as an objective instrument to support decision-making processes and ensure rational management behavior.
- The theoretical role of capital market data as an instrument for rationality assurance in group control.
- The identification of various sources of capital market data, such as equity and debt markets and analyst reports.
- The assessment of controller tasks (information, planning, control, and coordination) in the context of capital market data.
- Practical applications of instruments like Economic Value Added (EVA), Discounted Cash Flow (DCF), and Balanced Scorecards.
- Empirical findings regarding the adoption of shareholder value-oriented group control in German companies.
Auszug aus dem Buch
2.1 Management control defined as rationality assurance
There is a disagreement in the literature how management control should be defined and what its functions are. Most authors put coordination in the middle of their definition. These approaches differ in the degree of coordination done by the management control. Horváth, for example, understands management control as the coordination between the planning and control system, and the information supply system. Küpper defines management control as the coordination of the entire management system. Weber and Schäffer choose a different approach. They define management control as rationality assurance of the management. This is the widest definition and includes coordination as one function of the controller.
Management control understood as rationality assurance of the management fits the purpose of this paper best. This definition includes internal as well as external institutions of rationality assurances. Competing definitions concentrate on an internal view and do not cover external markets and market participants. They limit management control to internal institutions like the management control department and the management itself. External markets and market participants are only seen as producers of capital market data as additional information that needs to be processed by internal institutions. By way of contrast, in the context of rationality assurance external markets and market participants have two functions. They act as independent institutions of rationality assurance irrespective of internal institutions.
Summary of Chapters
1 Introduction: This chapter defines the research problem regarding group control in complex organizational structures and outlines the methodology for examining the integration of capital market data.
2 Basic Definitions: This section establishes the theoretical foundation by defining management control as rationality assurance and categorizing holding structures, sources of capital market data, and the nature of internal and external rationality assurance institutions.
3 Theory of the usage of capital market data in group control: This chapter analyzes how capital market data serves as an input for control instruments to enhance effectiveness and efficiency, specifically detailing tasks such as information processing, planning, control, and coordination, while critiquing the inherent limitations of these data sources.
4 Empirical evidence of the usage of capital market data in group control: This section reviews existing research studies on shareholder value-oriented group control in German holdings to provide real-world context on how these instruments are applied in practice.
5 Conclusion: This final chapter synthesizes the findings, summarizing the role of capital market data as a valuable complementary tool for group control despite existing challenges regarding data quality, efficiency, and market imperfections.
Keywords
Group Control, Management Control, Capital Market Data, Rationality Assurance, Shareholder Value, Listed Subsidiaries, Holding Structures, Economic Value Added (EVA), Discounted Cash Flow (DCF), Balanced Scorecard, Efficiency, Effectiveness, Information Asymmetry, Corporate Governance, Financial Reporting
Frequently Asked Questions
What is the primary focus of this seminar paper?
The paper explores the critical use of data derived from capital markets as a tool to support group control in large organizations, specifically those with listed subsidiaries.
What are the central thematic fields addressed in the text?
The core themes include the definition of management control as rationality assurance, the role of capital markets as providers of information, and the practical application of value-based control instruments.
What is the main objective or research question of this study?
The research asks how a holding company can control its listed subsidiaries using capital market data and what the potential rationality deficits and limitations of this approach might be.
Which scientific methods or analytical lenses are used?
The authors adopt a theoretical approach, framing management control as an institution of rationality assurance, and evaluate control instruments based on their potential for effectiveness and efficiency.
What does the main body of the text cover?
It covers definitions of control, the sources of capital market data (equity, debt, corporate control), the controller's specific tasks, and a detailed examination of instruments like EVA, DCF, and Benchmarking.
How would you characterize this work using keywords?
Key characterizations include shareholder value management, rationality assurance, group-level controlling, and the integration of external market information into internal systems.
Why is the "rationality assurance" concept central to this paper?
It provides a broad framework that allows the authors to analyze not just internal management accounting, but also how external actors and market data actively discipline and guide corporate decision-making.
What conclusions does the paper draw regarding the efficiency of using capital market data?
The paper notes a trade-off, concluding that while capital market data improves the quality of information (effectiveness), it often increases processing costs and time consumption, which can negatively impact overall efficiency.
- Quote paper
- Martin Renze-Westendorf (Author), Christian Schürmann (Author), 2005, A critical View on the Usage of Data from Capital Markets for Group Control, Munich, GRIN Verlag, https://www.grin.com/document/58645
