Terje Berg

Working capital management: evidence from Norway

Purpose - – The purpose of this paper is to provide empirical evidence of whether working capital management (WCM) has an effect on the profitability of small- and medium-sized Norwegian firms. Design/methodology/approach - – The data comprise 21,075 Norwegian small- and medium-sized enterprises and 84,300 observations made between 2010 and 2013. Panel data regressions were applied with fixed effects and a two-stage least squares analysis was employed to control for endogeneity. Findings - – The results indicate that reducing cash conversion cycle will increase profitability. Even though endogeneity may exist, this does not affect the results from the previous analysis. Similar results are also obtained when industry-specific effects are controlled for, supporting the robustness of the results. The relevance of quadratic dependencies of the profitability on independent variables was also identified and suggests a decreasing trend of return on assets with increasing values of the WCM’s characteristic variables. Research limitations/implications - – Drawing on similar studies, this study confirms that WCM is relevant for firms’ profitability. Practical implications - – The practice of aggressive working capital policy in Norwegian firms is confirmed by the results of this study. Originality/value - – This study contributes to the current research on the relationship between WCM and profitability by using a large dataset to add further robustness to results, and thus verifying whether or not the results in previous studies may be confirmed or not. Moreover, this is the first published study about this relationship among Norwegian firms in different industries, thus filling a gap in similar research conducted in other European countries.

Risk reporting to the board of directors : comparison of norwegian power companies and banks

There is a never-ending debate about practice relevance within management accounting and control research. This dissertation contributes to an understanding of the gap claimed between theory and practice. The concepts of theory and practice are discussed, and the key finding is that there is no unanimous definition of the concepts, something which may contribute to confusion about the content of the gap. Moreover, in addition to having multiple meanings, the concepts are often applied implicitly. In this dissertation, the concepts are considered according to the following: (1) theory as ideas and hypotheses which explain something, and (2) practice as a translation of these ideas into action. The gap is a discrepancy between the ideas and how these ideas are executed. There is an underlying assumption that this gap matters only if theories in some way do not have an impact on managerial decisions. The papers describe certain situations where this gap is present and relevant. Based on a multiple case study, Paper 1 investigates the ideals of risk reporting in light of the concept of enterprise risk management, a concept that is introduced by consultants and promoted by governing bodies. The main finding is that the ideals of enterprise risk management are not implemented in practice. The topic of Paper 2 is the use of investment analysis techniques and choice of cost of capital. The survey shows that net present value and weighted average cost of capital have the most widespread use. The paper discusses possible causes and consequences of the gap between theory and practice among these well-established methods. The purpose of Paper 3 is to study whether the introductory budgeting textbooks have changed over the past 20 years, as expected based on criticism from both academics and practitioners. This bibliographic study of an important bridge between theory and practice finds only minor traces of the critique being incorporated in new editions of textbooks. Paper 4 addresses the question of how cost-based pricing can be performed in the presence of uncertainty and risk. The paper exemplifies one possible strategy for determining internal and external prices in order to reduce the risk of losses that arise from under-allocation of costs. In contrast to the other three papers, this one is normative. In addition, the introduction presents a normative framework which can be applied by researchers to precis in their communication with businesses the purposes for which certain objects are studied. Practitioners can apply the framework when configuring their control package. The introduction closes with specific implications of the dissertation for researchers, lecturers and practitioners, three target groups with different perspectives on management accounting and control. All over the present work also contribute to management accounting and control research by applying mixed-methods and thus crossing paradigms something which is rarely observed in the literature.

A Compass for Teaching Enterprise Governance

A business schools study programme in general and the field of enterprise governance1 in particular can be characterised as a mosaic, that is, seemingly independent parts that, in the end, create ...

Stuck at the Threshold

This study also revealed that a substantial number of the students did not have the stamina to complete the entire learning activity, even though all these criteria were reported to be present. 90 students participated at the first assignment (out of a total of seven assignments). The initial questions in the assignments were quite easy and then the degree of difficulty increased. When facing obstacles mastering the materials many students dropped out of the learning activity and this was especially clear from the third assignment.