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This essay seeks to analyze Nicolaj Siggelkow and Phebo Wibben’s article, which discusses the effectiveness of using LIVA (Long-Term Investor Value appropriation) in creating long-term value for clients. According to the authors, most tools for measuring value give short-term appropriations, so the introduction of LIVA provides the most efficient approach to maximizing long-term value. The article demonstrates how LIVA measures a company’s data on value increase and decrease over specific periods. Also, the authors compare the efficiency of LIVA over other short-term measuring devices such as the return of capital (ROI) and total shareholder return (TSR).
The most important thing to consider in creating long-term value for shareholders is interpreting the meaning of long-term value according to the particular company. The article clearly defines the meaning of long-term value using the Apple company as an example. The report also compares LIVA’s long-term value to TSR’s short-term value through a given period to explain the efficiency of the measuring device. Frigo et al. (2018) argue that a suitable device for measuring value must be consistent in providing accurate data over long periods. The article addresses the capacity of LIVA to pick up data through changing dynamics and long periods.
Apart from measuring long-term value, LIVA gives historical information on company economic performance and current economic value. Shareholders need to know a companies financial status before buying shares. Therefore the device is efficient in providing additional information on the accurate history.
In conclusion, LIVA rates individual company performance and rates industries in general such as tech or telecommunications and analyses the most profitable and bankrupt industry. Since LIVA uses absolute measures in calculating value, it does not consider small firms with less economic impact. The article does not explain how small companies can use LIVA and if it is beneficial or not. Further research should be done on ways of including small companies in the system.
Reference
Frigo, Mark L,C.M.A., C.P.A. (2018). Creating greater long-term sustainable value. Strategic Finance, 100(4), 28-36.
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