Verifying functionality: Maximizing value of the firm (MVF)

Victor Tang*, Kevin Otto, Warren Seering

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingChapterScientificpeer-review

Abstract

Macro-economists cannot expect governments or central banks to use them as test objects for their theories. Likewise, we cannot expect firms to submit themselves as test subjects to verify the functionality of our prescriptive paradigm. Therefore we simulate with a surrogate of a real company. The surrogate is system dynamics model of ADI, a high technology electronics firm. The model has over 620 equations to represent ADI’s operational behavior of its functional areas and the firm’s interactions with its external environment. The model’s documentation covers over 400 pages. This chapter models the decision to Maximize the Value of Firm (MVF). The goal is to shield ADI from “vulture hunters”. High market value will make it costly to buy control of the firm. As such, MVF is directed at forces exterior of ADI. Best effort has been made to attach the data for the simulations as appendices and all the calculations are shown and illustrated.

Original languageEnglish
Title of host publicationExecutive Decision Synthesis
Pages203-308
Number of pages106
ISBN (Electronic)978-3-319-63026-7
DOIs
Publication statusPublished - 1 Jan 2018
MoE publication typeA3 Part of a book or another research book

Publication series

NameContributions to Management Science
ISSN (Print)1431-1941
ISSN (Electronic)2197-716X

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