Value management and common accounting performance measures for corporations

Management is aware that the value of firms is the ultimate measure of company performance. However, management has been using common accounting measures as an operating guide because the linkage between operational planning and value is vague and complex and, therefore, difficult to apply. Managers need to have clear targets and performance measures to track progress. This paper examines if a set of common accounting performance measures are linked tightly to the overall value of the firm. An abductive learning network (ALN) approach, an artificial intelligence technique, is used in this research because an ALN approach is non-parametric and can capture a subtle dynamic relationship between input and output variables, which is not obvious in linear statistical analysis. Empirical results show that an ALN model is very effective in synthesizing the value of the firm using six common accounting variables. The results also provide four strategic variables that can be used for devising strategic and operating plans to maximize the value of firms.