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Creating Shareholder Value : A Guide for Managers and Investors - Alfred Rappaport

Creating Shareholder Value

A Guide for Managers and Investors

Hardcover Published: 1st December 1997
ISBN: 9780684844107
Number Of Pages: 224

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The ultimate test of corporate strategy, the only reliable measure, is whether it creates economic value for shareholders. Now, in this substantially revised and updated edition of his 1986 business classic, "Creating Shareholder Value, " Alfred Rappaport provides managers and investors with the practical tools needed to generate superior returns. After a decade of downsizings frequently blamed on shareholder value decision making, this book presents a new and indepth assessment of the rationale for shareholder value. Further, Rappaport presents provocative new insights on shareholder value applications to: (1) business planning, (2) performance evaluation, (3) executive compensation, (4) mergers and acquisitions, (5) interpreting stock market signals, and (6) organizational implementation. Readers will be particularly interested in Rappaport's answers to three management performance evaluation questions: (1) What is the most appropriate measure of performance? (2) What is the most appropriate target level of performance? and (3) How should rewards be linked to performance? The recent acquisition of Duracell International by Gillette is analyzed in detail, enabling the reader to understand the critical information needed when assessing the risks and rewards of a merger from both sides of the negotiating table.

The shareholder value approach presented here has been widely embraced by publicly traded as well as privately held companies worldwide. Brilliant and incisive, this is the one book that should be required reading for managers and investors who want to stay on the cutting edge of success in a highly competitive global economy.

Industry Reviews

Charles W. McCall President and CEO, HBO & Company I've had the pleasure of following Al Rappaport's work for over 20 years and I feel this is his best work ever. The insights on acquisitions and the work on performance measurements are very important for fast-growing companies. Al's principles have helped us grow from a market value of less than $100 million to over $7 billion in the past six years. Martin L. Leibowitz, Vice Chairman and Chief Investment Officer, TIAA-CREF Rappaport's work shines a bright light on how to systematically apply fiancial theory to the pratical problems of corporate valuation. The distinction Rappaport makes between shareholder return and corporate return is particularly critical in today's markets. Every serious ananlyst should have a firm understanding of his writings. Stephen F. Bollenbach President and CEO, Hilton Hotels Corporation Updates all of us on the front lines with the latest thinking about creating shareholder value from the social aspects to the very specific. I recommend this book to any person seriously concerned about the function of a corporation in a market economy. Harry M. Jansen Kraemer, Jr. President, Baxter International, Inc Dr. Rappaport does a phenomenal job of bridging the gap between shareholder value theory and practice. I highly recommend Creating Shareholder Value for CEOs, CFOs, business school students and anyone who wants to truly understand as well as create shareholder value. Michael J. Mauboussin Managing Director, Equity Research, Credit Suisse First Boston Corporation Herein lie the power tools of any investor's toolbox. This significant update to the seminal Creating Shareholder Value offers investors and corporate managers a theoretically sound and practically usable guide for decision making. Business people who have been jostled by the latest management fads and buzzwords will find refuge in Rappaport's well-conceived and effective framework. Alan Shapiro Ivadelle and Theodore Johnson Professor of Banking and Finance, Graduate School of Business Administration, University of Southern California Al Rappaport lives up to his reputation as the father of shareholder value. This book is an invaluable resource for anyone committed to creating shareholder value or teaching about it. Creating Shareholder Value presents not just the basic principles and theoretical underpinnings of its subject matter but also their application through numerous well-chosen and up-to-date real-world examples.

List of Illustrations
Shareholder Value And Corporate Purpose
Management Versus Shareholder Objectives
Shareholders and Stakeholders
Shareholders Are "Us"
Shortcomings Of Accounting Numbers
Earnings-An Unreliable Bottom Line
The Trouble with Accounting Return on Investment (ROI)
ROI Versus DCF Return Illustrated
Additional Shortcomings of ROI
Shortcomings of Return on Equity (ROE)
Shareholder Value Approach
Estimating Shareholder Value
Estimating Shareholder Value Added (SVA)
Threshold Margin
The Shareholder Value Network
Appendix: Conventional Versus Shareholder Value Break-Even Analysis
Formulating Strategies
Strategy Formulation Process
Competitive Advantage and Shareholder Value
Strategy "Best Sellers"
Valuing Strategies
Strategy Valuation Process
Valuing Alternative Business Opportunities
Valuing Interdivisional Synergies
Choosing Optimal Investment Level for a New Business
Do Stock Repurchases Create Value?
Value-Creation Questions
Stock Market Signals To Management
Reading the Market
Corporate Versus Shareholder Rate of Return
Management Implications
Performance Evaluation And Executive Compensation
CEOs and Other Corporate-Level Executives
Operating Managers
Performance Evaluation Alternatives-Shareholder Value Added (SVA)
Performance Evaluation Alternatives-Residual Income
Performance Evaluation Alternatives-Economic Value Added (EVA)
Performance Evaluation Alternatives-Change in Residual Income or Change in EVA
Leading Indicators of Value
Target Level of Performance
Linking Rewards to Superior Performance
Mergers And Acquisitions
The Acquisition Process
Value Creation Framework
Do Mergers Create Value for the Acquiring Company?
Gillette's Acquisition of Duracell International
Premium Advice for Targets
Implementing Shareholder Value
Implementation Objectives
Gaining Commitment
Introducing Shareholder Value
Reinforcing Shareholder Value
The Shareholder Scoreboard
A Rising Tide Doesn't Lift All Stocks
Investing as a Game of Expectations
About the Author
Table of Contents provided by Publisher. All Rights Reserved.

ISBN: 9780684844107
ISBN-10: 0684844109
Audience: Professional
Format: Hardcover
Language: English
Number Of Pages: 224
Published: 1st December 1997
Publisher: Simon & Schuster
Country of Publication: US
Dimensions (cm): 23.5 x 15.6  x 2.3
Weight (kg): 0.46
Edition Number: 2
Edition Type: Revised