Value Based Management in the Practice of Czech Companies

Value Based Management in the Practice of Czech Companies

Paper in proceedings (conference paper)

Lack of long-term financial sources for restructuring of economy is one of the serious problems of transforming economies. If own internal sources of financing are not sufficient for the financing, banks and capital market operate as the basic providers of long-term sources. Following paper discusses the question of evaluation and measurement of performances of the companies which apply for financial sources at investors so as to finance investment needs, especially technical advancement. As the criterion for evaluation of the performance of companies was used shareholder value. Using of this criterion, however, in the conditions of the Czech economy clashes with many problems related to valuation of the rate of profit of investments. The most serious problem is the specification of category of costs of equity. Due to small number of companies, the shares of which are traded in the stock exchange and low effectiveness of capital market, it is not possible to use the standard method of calculation of the indicator economic added value. Submitted paper analyzes methods of evaluation of performance of companies from the point of formation of the value for owners, points at pre-requisites of their use and indicates processes which could lead to elimination of existing methodological processes and increasing of the effectiveness of companies.

Lack of long-term financial sources for restructuring of economy is one of the serious problems of transforming economies. If own internal sources of financing are not sufficient for the financing, banks and capital market operate as the basic providers of long-term sources. Following paper discusses the question of evaluation and measurement of performances of the companies which apply for financial sources at investors so as to finance investment needs, especially technical advancement. As the criterion for evaluation of the performance of companies was used shareholder value. Using of this criterion, however, in the conditions of the Czech economy clashes with many problems related to valuation of the rate of profit of investments. The most serious problem is the specification of category of costs of equity. Due to small number of companies, the shares of which are traded in the stock exchange and low effectiveness of capital market, it is not possible to use the standard method of calculation of the indicator economic added value. Submitted paper analyzes methods of evaluation of performance of companies from the point of formation of the value for owners, points at pre-requisites of their use and indicates processes which could lead to elimination of existing methodological processes and increasing of the effectiveness of companies.

value based management, cost of capital, economic valued added, risk of owners

REŽŇÁKOVÁ, M.

01.01.2003

La Universidad de Sevilla

Seville

84-688-8441-3

Proceeding of international academic workshop: Research in Business: new trends for a new Europe

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