INVESTIGATING STEINHOFF INTERNATIONAL HOLDINGS’ RESULTS: APPLICATION OF INTEGRATED FINANCIAL DECISION-MAKING MODEL AND LEAN ACCOUNTING PRINCIPLES

Year 2018, Volume: 10 Issue: 1, 167 - 183, 01.01.2018

M.j. Swanepoel

Abstract

The business environment has changed drastically since the start of the new millennium. Over the years, owners of businesses have been sidelined from the daily operations of companies by managers and directors. This phenomenon is known as the agency theory whereby the managers and directors are driven, like shareholders and investors, by wealth creation, which sometimes culminates in greed. This greed usually ends with financial losses to the shareholders and investors. Investors use traditional financial decision-making models to determine the best investment possibilities. However, these models have failed shareholders and investors time and time again. Shareholders and investors are looking towards the accounting profession for answers. The integration of lean accounting principles in decision-making models could be a possible solution. The purpose of this study is to investigate if an integrated financial decision-making model, using lean accounting principles, could have provided the shareholders and investors of the ill-stricken Steinhoff International Holdings with results, which could have led to different decisions. A qualitative research approach using document analysis was employed in the study. The document analysis was deemed to be appropriate as it is a systematic procedure for the review and evaluation of documents. The annual financial statements of Steinhoff International Holdings for the five years ending 30 September 2016 were analysed and applied to the integrated financial decisionmaking model using lean accounting principles. The results of the analysis revealed that using the integrated financial decisionmaking model more conservative results on key financial ratios were obtained, compared to traditional financial decision-making models. These more conservative results could have changed shareholders and investors’ decision regarding Steinhoff International Holdings, long before its 52 week share price range fell from 7401c to 201c, emanating in a 97,3% loss in value to shareholders. The recommendation of this study is to integrate financial decision-making models with lean accounting principles. This study could impact shareholders and investors’ decision-making, providing an alternative and more conservative financial decision-making model.

Keywords

Financial ratios, analysis, impact, decision models, financial models

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