The Valuation of Management Control Systems in Start-Up Companies: International Field-Based Evidence
Year: 2014
Type: article
Abstract: The question of whether management control systems (MCSs) adopted by start-up companies are valuable is examined. We investigate an international sample of start-ups, including their detailed MCS adoptions and financing histories. We find that higher MCS intensity, which is measured as the number of systems adopted at year-end immediately prior to the financing round, has a positive impact on company value. We also find that equity financiers value MCS more than do debt financiers. The valuation implication is more pronounced for start-up companies operating in highly competitive environments and with higher growth. We also document a positive relation between change in MCS intensity and change in firm value. Additional analyses show that higher company valuation is found for companies that align their MCS choices with their strategic positioning. In particular, systems that implement strategy are perceived to be more important and valuable than others. Overall, our paper provides new evidence for the debate concerning the merits of formal control in start-up companies.
Source: European Accounting Review
Authors: Antonio Davila, George Foster, Ning Jia
Language: English
Subfield: Management Information Systems
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1991328245