Redefining Business Models Haslam, Colin; Andersson, Tord; Tsitsianis, Nick ...
2013, 20130507, 2012, 2013-05-07, 20130101
eBook
The world has moved on in the advanced economies where credit based financial systems coupled with malleable accounting systems disconnect capitalization and wealth accumulation from GDP trajectories ...and financial surplus. This, the book argues, is the product of economic, financial and cultural imperatives that privilege and encourage financial leverage for wealth accumulation.
This text re-works business models for a financialized world and presents a distinctive insight into the way in which national, corporate and focal firm business models have adapted and evolved. It also shows how, in the current financial crisis, financial disturbances can be amplified, transmitted and made porous, by accounting systems, threatening economic stability. By making visible the tensions and contradictions embedded in this process of economic development, the authors have constructed a loose business model conceptual framework that is also grounded in accounting.
This is a valuable resource for practitioners, academics and policy makers with an interest in management, accounting and economic policy.
This article considers how permissive regulatory conditions helped change the size and scope of the US mortgage market. Asset backed securitization facilitated an expansion of the US mortgage market ...and modified the structure of the value chain within which financial assets, risk and liquidity were managed. New sophisticated mortgage products, indulgent lending practices, loose credit assessment and flimsy documentation increased the probability of mortgage default in an economic downturn. US banks were not in a position to absorb mark-to-market losses on mortgage assets and goodwill impairment resulting from a credit crunch because they operate with narrow profit margins and a limited equity cushion in the balance sheet. This article questions the viability and sustainability of this banking business model.
This paper constructs an account of how financialization is directing strategy in the S&P 500 now that senior managers are required to both deliver
value creation and respond to
value absorption in ...an era of shareholder value. Value absorption arises out of the need to account for the market value of capital market transactions and this modifies reported corporate financials. Value creation and value absorption are directing strategy and financial arbitrage across product, factor and capital markets and between stakeholder groups as managers struggle to hold cash extraction out of sales revenue and maintain an increased share of cash distribution to shareholders.
Purpose: This paper conceptualises a firm's business model employing stakeholder theory as a central organising element to help inform the purpose and objective(s) of business model financial ...reporting and disclosure. Framework: Firms interact with a complex network of primary and secondary stakeholders to secure the value proposition of a firm's business model. This value proposition is itself a complex amalgam of value creating, value capturing and value manipulating arrangements with stakeholders. From a financial accounting perspective the purpose of the value proposition for a firm's business model is to sustain liquidity and solvency as a going concern. Findings: This article argues that stakeholder relations impact upon the financial viability of a firm's business model value proposition. However current financial reporting by function of expenses and the central organising objectives of the accounting conceptual framework conceal firm-stakeholder relations and their impact on reported financials. Practical implications: The practical implication of our paper is that 'Business Model' financial reporting would require a reorientation in the accounting conceptual framework that defines the objectives and purpose of financial reporting. This reorientation would involve reporting about stakeholder relations and their impact on a firms financials not simply reporting financial information to 'investors'. Social Implications: Business model financial reporting has the potential to be stakeholder inclusive because the numbers and narratives reported by firms in their annual financial statements will increase the visibility of stakeholder relations and how these are being managed. What is original/value of paper: This paper's original perspective is that it argues that a firm's business model is structured out of stakeholder relations. It presents the firm's value proposition as the product of value creating, capturing and manipulating firm-stakeholder relationships. The originality of this paper is that it calls into question the nature of the accounting conceptual framework. Business model financial reporting will involve reporting about material stakeholder relationships and how these impact upon the viability of a firm's business model value proposition.
This paper contributes to the research in accounting and the debate about the nature of carbon footprint reporting for society. This paper utilises numbers and narratives to explore changes in carbon ...footprint using UK national carbon emissions data for the period 1990–2009 and six years (2006–2011) of carbon emissions data for the FTSE 100 group of companies and a case study that focuses on the UK mixed grocery sector. Our argument is that existing approaches to framing carbon disclosure generate malleable, inconsistent and irreconcilable numbers and narratives. In this paper we argue for an alternative framing of carbon disclosure informed by a reporting entities business model. Specifically, we suggest, that a reporting entity disclose its carbon–material stakeholder relations. This alternative, we argue, would increase the visibility of carbon generating stakeholder relations and avoid some of the difficulties and arbitrariness associated with framing carbon disclosure around a reporting entity boundary where judgements have to be made about responsibility and operational control.
•Carbon emissions in the S&P500 for the period 2008 to 2014 have not been reduced.•Carbon intensive business models present a threat to financial stability from ‘stranded assets’ and ‘carbon ...bubbles’.•Financial institutions should migrate investment portfolios away from carbon intensive business models.•Carbon intensive business models are conjoined to less carbon intensive business models which generate substantial financial leverage.
This article accounts for carbon emissions in the S&P 500 and explores the extent to which capital is at risk from decarbonising value chains. At a global level it is proving difficult to decouple carbon emissions from GDP growth. Top-down legal and regulatory arrangements envisaged by the Kyoto Protocol are practically redundant given inconsistent political commitment to mitigating global climate change and promoting sustainability. The United Nations Environment Programme (UNEP) and European Commission (EC) are promoting the role of financial markets and financial institutions as drivers of behavioural change mobilising capital allocations to decarbonise corporate activity.
•REITs are a relatively new business model in the FTSE 100.•REITs investors qualify for tax concessions so long as 90 percent of profits are distributed.•Fair value accounting (FVA) is a key element ...governing a REITs financial viability.•Fair value accounting (FVA) triggered significant financial instability in UK REITs.
This paper is about the Real Estate Investment Trust (REIT) business model. REITs benefit from tax concessions and Fair Value Accounting (FVA) practices. REITs distributing over 90 percent of profits can obtain tax concessions for their shareholders. This encourages profit distribution at the expense of accumulating retained earnings in shareholder equity. The financial viability of REITs depends upon FVA because this records holding gains when property values are increased. These holding gains can be employed to generate additional financial leverage. However, REITs are exposed to property market volatility and this can quickly undermine solvency, credit ratings and financial stability.
► The private equity business model (PEBM) depends on leveraging returns on equity with debt finance. ► The current financial crisis is testing the viability of the PEBM. It is no longer on ‘terra ...firma’ but on ‘shifting sands.’ ► The case of EMI acquired by the private equity firm ‘Terra Firma’ reveals the difficulty in transforming an acquired firm's financials. ► The PEBM is not delivering spectacular returns to investors because funds drawn down generally exceed cash repayments.
This paper reveals how the financial crisis undermined the performance of Private Equity Partnerships (PEPs). The private equity business model depends upon leveraged finance coupled with corporate transformation from market arbitrage that, in turn, delivers inflated market valuations and exit multiples. Private equity partnerships conjoin corporate productive and financial activity with speculative capital market demands where liquidity, risk appetite and market value appreciation matter. It is a business model where productive transformation of acquired firm's is often disappointing because leverage inflates balance sheet capitalization ahead of cash earnings capacity. It is also a volatile business model because capital market valuations and fair value reporting amplify holding gains and losses for limited equity partners. It is a business model constructed on shifting sands not terra firma.
The recent Maystadt report (2013) challenged the European Parliament to modify governance arrangements surrounding the design and endorsement of international financial reporting standards (IFRS) ...issued by the International Accounting Standards Board (IASB). In addition the Maystadt report constructs an argument that accounting information has the capacity to also modify behaviour and that this might not be conducive for the European public good, financial stability and economic development. In this paper we argue that IFRS need to be stress tested for their impact on firm-level financial stability in a financialized world. The financialized firm can revalue a range of assets to their market value crystalizing future earnings into current values but these valuations can become impaired. Asset value impairments will be charged to shareholder equity but this is being hollowed out because a higher proportion of earnings are being distributed to shareholders. Accounting disclosures are not only an information feed to users they inform the stewardship and control of a firm’s resources and in the financialized firm the potential for financial instability is heightened and this can translate into a moral hazard for society.
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