“…Cash Flow Return on Investment (CFROI)—CFROI expresses an estimate of a company's single‐period cash flow as a percentage of total investment. Madden (1999) provides a detailed discussion of CFROI.…”
We examine the performance of 84 firms that adopt value-based management (VBM) systems during the period 1984-1997. The typical firm significantly improves matched-firm-adjusted residual income after adopting VBM. This improvement persists for the five post-adoption years studied. After controlling for possible sample bias, we find that large firms show less improvement than small firms. We find a negative relation between tying compensation to VBM and post-adoption performance. We also find that firms reduce capital expenditures following VBM adoption, but that the reductions in spending do not differ based on the firms' growth opportunities. Overall, the evidence suggests that VBM improves economic performance and the efficient use of capital. Copyright 2007 The Authors Journal compilation (c) 2007 Blackwell Publishing Ltd.
“…Cash Flow Return on Investment (CFROI)—CFROI expresses an estimate of a company's single‐period cash flow as a percentage of total investment. Madden (1999) provides a detailed discussion of CFROI.…”
We examine the performance of 84 firms that adopt value-based management (VBM) systems during the period 1984-1997. The typical firm significantly improves matched-firm-adjusted residual income after adopting VBM. This improvement persists for the five post-adoption years studied. After controlling for possible sample bias, we find that large firms show less improvement than small firms. We find a negative relation between tying compensation to VBM and post-adoption performance. We also find that firms reduce capital expenditures following VBM adoption, but that the reductions in spending do not differ based on the firms' growth opportunities. Overall, the evidence suggests that VBM improves economic performance and the efficient use of capital. Copyright 2007 The Authors Journal compilation (c) 2007 Blackwell Publishing Ltd.
“…The next part of the study examined the relative performance of the HPC in relation to the mean performance of their peers among MSCI World index constituents for each of the abovementioned test periods (1988-2007for sustaining HPC, 1988and 1996-2007for declining HPC, and 1988-1999and 1991-2007. We expect ''high-performance'' companies to excel above their industry peers on performance drivers and measures in periods when they held the HPC status.…”
Section: Methodsmentioning
confidence: 99%
“…Cash flow return on investment (Madden, 1999) at twice or more the cost of capital Growth rates in assets exceeding average gross domestic product growth Relative total shareholder returns above the S&P 500 average or other relevant indices.…”
Section: Previous Researchmentioning
confidence: 99%
“…Emerging HPC Performance: 1988-1999Compared to 1991-2007. (a) Emerging HPC: 1988-1999to 1991-2007 are differentiated on cash flow measures with one exception (cash flow yield for industry 56). As noted earlier, cash flow return on stockholders' equity is not a differentiator.…”
Purpose-This study investigates the links between strategy, execution, and financial performance with particular attention to the underlying performance drivers that describe how a company executes strategy to create financial value. Methodology-This study empirically investigates companies in the United States and 22 other countries over a 20-year period (11 successive 10n-year periods: 1988-2007): (1) to compare financial performance characteristics of HPC versus non-HPC; (2) to study the sustainability of performance in HPC; and (3) to identify the companies that exit or
“…• Cash flow return on investment (CFROI) (Madden, 1999) at twice or more the cost of capital or greater than 5% discount rate for 10 consecutive years. • Cumulative growth rate in total assets over 10-year period exceeds cumulative growth rate of World GDP over the same 10-year period.…”
Purpose À The present study investigates whether companies that exhibit high performance characteristics in the pre-financial crisis period can maintain their high performance in the financial crisis period of 2007À2009 and, in particular, the post-financial crisis period of 2010À2011. Methodology À The current study of 1,473 companies in 25 countries and 66 industries (MSCI index) (1) extends the empirical research of prior studies through the year 2011; (2) identifies the operating characteristics (performance drivers and performance measures) and associated risk factors which were most critical with regard to sustaining, exiting, and entering HPC companies during the five 10-year periods since 1998À2007, and (3) summarizes conclusions about HPC results
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