Carsten Homburg

Using data envelopment analysis to benchmark activities

Abstract This paper investigates the use of data envelopment analysis (DEA) for activity-based management. We analyze the pros and cons of DEA as applied to benchmark activities. Firstly, DEA merely requires activity information which can be easily gained, resulting in low information cost. Secondly, in benchmarking activities, DEA does not require any financial evaluations. This allows to benchmark activities of decision making units (DMUs) that differ in their capacity costs. Thirdly, DEA extends the benchmarking basis by combining observed activities. This might result in improvements for DMUs which are not directly dominated by observed DMUs. However, we will also show that the information that DEA provides for inefficient DMUs is in general not sufficient to improve their activities. To improve inefficient activities it is still necessary to analyze them in detail. Therefore, the main advantage of the proposed procedure is that it identifies critical activities without requiring too much information.

How do Individual Investors React to Global IFRS Adoption

We examine the impact of global IFRS adoption on cross-border equity investments by individual investors. Our proxy for cross-border equity investments is trading volume in the Open Market at Frankfurt Stock Exchange. The Open Market is a segment designed for German individual investors to trade a large selection of foreign stocks. Using a sample of 5,637 firms from 31 countries around the world, we find that stocks experience a significant increase in Open Market trading volume following mandatory adoption of IFRS. This effect is more pronounced for attention-grabbing stocks (e.g., stocks experiencing an increase in media coverage following IFRS adoption). Our results suggest that global IFRS adoption enhances cross-border equity investments by individual investors. However, this effect does not materialize equally across stocks due individual investors’ limited attention.

How should the cost of joint risk capital be allocated for performance measurement

We consider the problem of allocating the cost of risk capital based on value-at-risk (VaR) for performance measurement in a decentralized organization with several divisions. The focus of the analysis is on fair risk capital allocation schemes. To this end, we analyze several well-known allocation schemes in the context of a model based on cooperative game theory using the core concept. We provide theoretical evidence that two allocation schemes, the beta method and the nucleolus method, turn out to perform best in allocating the cost of risk capital. A simulation study shows that another allocation method, the cost gap method, shows similar results. However, within an experiment we obtain empirical evidence that the core concept is of minor importance with respect to individually perceived fairness. Subjects tend to favor simple allocation rules such as the activity-level method and the beta method. In summary only the beta method can be considered to be fair both from a normative and a descriptive point of view.

Improving activity-based costing heuristics by higher-level cost drivers

Abstract Activity-based costing (ABC) tries to allocate overhead costs to cost objects more accurately than traditional cost systems. However, since ABC proportionalizes overhead costs it is a heuristic. The paper uses simulations and mixed-integer programming to analyze the extent of the sub-optimality incurred by ABC-heuristics. While previous research has focused on ABC systems with a simple set of cost drivers, thereby restricting the potential of ABC as a heuristic, the paper analyzes the effects of establishing a cost driver corresponding to a higher cost level. Specifically, a portfolio-based cost driver captures the demand heterogeneity triggered by the portfolio. This heterogeneity driver is then used to proportionalize all costs due to inflexible overhead resources. One of the main findings is that such a heterogeneity driver improves the quality of ABC-heuristics significantly.

Hierarchical multi-objective decision making

This paper proposes a hierarchical procedure for solving decision problems with multiple objectives. The procedure consists of two levels, a top- and a base-level. The main idea is that the top-level only provides general preference information. Taking this information into account the base-level then determines a compromise solution. For a multi-objective linear program it will be shown how such a hierarchical procedure can be structured by deriving weight restrictions from the general preference information of the top-level and by using the interactive MODM procedure of Zionts and Wallenius on the base-level.

Fundamental Information in Technical Trading Strategies: FUNDAMENTAL INFORMATION IN TECHNICAL TRADING STRATEGIES

Technical trading strategies assume that past price trends predict future ones. Their application may be profitable if the past trend reflects fundamental information that has not yet been fully priced. However, if the trend merely reflects temporary pricing pressures, technical trading will presumably fail. We argue that using financial statements as an additional source of information helps to avoid such failure. We implement a trading strategy that uses operating cash flows to identify enduring past price upturns. This strategy outperforms a purely technical momentum strategy, seems to be practicable, and its profits exceed transactions costs.

Kennzahlenbasiertes Risikocontrolling in Industrie- und Handelsunternehmen

ZusammenfassungRisikocontrolling in Industrie- und Handelsunternehmen steht durch das Gesetz zur Kontrolle und Transparenz im Unternehmensbereich (KonTraG) im Fokus betriebswirtschaftlicher Forschung. Das Kon- TraG verlangt hier ein Risikocontrolling, ohne dabei Hinweise für dessen konkrete Ausgestaltung zu bieten. Die vorliegende Arbeit untersucht daher die Verwendung von Kennzahlen zur Risikoanalyse und risikoadjustierten Performancemessung. Im Zentrum steht die Entwicklung der Kennzahl „Corporate Value on Discounted Risk Value” (CVODRV), die sich besonders für das Risikocontrolling in Industrieund Handelsunternehmen eignet. Dort hat man es im Gegensatz zu Finanzinstitutionen häufig mit schlecht handelbaren Risiken zu tun, was der CVODRV in geeigneter Weise berücksichtigt.

Production planning with multiple objectives in decentralized organizations

The paper presents a procedure for supporting the process of production planning in decentralized organizations. A situation is considered similar to that of the Dantzig/Wolfe algorithm: several divisions use scarce production resources that are controlled by the top-management. In contrast to the Dantzig/Wolfe situation, however, all decision makers - on the top - as well on the base-level - are assumed to have more than one goal. Therefore, within the process of production planning a hierarchical negotiation between top- and base-level takes place, in which interpersonel as well as intrapersonel conflicts have to be solved. The well-known interactive MODM of Zionts/Wallenius is modified in order to structure the hierarchical negotiation and to model its hierarchical character. The negotiation results in a feasible resource allocation and in a set of aspiration levels for the goals of the top-level which have to be met by the different divisions.

Integration von wertorientierter Unternehmensführung und strategischem Kostenmanagement als zentrale Controllingaufgabe

In der betriebswirtschaftlichen Theorie herrscht bisher noch kein einheitliches Controllingverstandnis vor. Vermehrt wird allerdings eine Koordinationsfunktion des Controlling hervorgehoben. Unterschiede bestehen vor allem in der Frage des Umfangs dieser Koordinationsfunktion.1 Unstrittig sollte es sein, dass dem Controlling eine Koordinationsfunktion von Planungs- und Kontrollsystem sowie dem Informationssystem einer Unternehmung zukommt,2 wobei man zwischen einer risikoorientierten, operativen, strategischen und wertorientierten Sichtweise unterscheiden kann (vgl. Abbildung 1).

Zentrales und dezentrales Risikocontrolling in Industrieunternehmen

SummaryUsing a formal model, the paper analyzes risk management for nonfinancial corporations. A firm is considered that produces and sells divisional products. This triggers uncertain cash flows, the risk of which is measured by the Cash Flow at Risk (CFaR)-concept. The CFaR determines the required amount of equity. Several possibilities of implementing a risk management system are discussed, with a particular focus on the required equity. A major result is that a more restrictive risk policy does not necessarily lead to an increasing demand of equity. Furthermore, for the case of several divisions the differences of centralized and decentralized risk management are analyzed.