Business Commons^™

This paper examines whether investors’ valuations of cash and share-put warrants are influenced by their potential differential effect on firm solvency. It is motivated by the enactment of SFAS 150, which requires that all contingent put warrant obligations be classified as balance sheet liabilities regardless of put type. Consistent with the critics of SFAS150, we show that market participants differentially value cash and share-puts based on their solvency characteristics beyond the firm’s recorded assets and liabilities. Our results add to existing capital structure literature by suggesting that complex financial instruments (such as cash and share-puts) be reported separately from each …

With or without a balanced scorecard, it is easy for managers to become inundated with metrics and measures. In this article, we first highlight the differences between lagging and leading measures. Second, we illustrate the importance of differentiating the strategic leading indicators-the key leading measures-from those that may improve operational efficiency without significant improvements in profitability. Third, we use a business simulation to demonstrate that focusing on and improving the key leading measures has the greatest impact on profitability, but getting lost in the secondary measures dilutes the effect. Combined, the results illustrate that less may be more when it …