Guidepost to Wealth Creation: Value-Relevant Track Records

In creating wealth, the corporate sector is hampered by weaknesses in the corporate governance system and the accounting system. The analysis presented in this article supports recommendations that managements and boards: 1) provide value-relevant, long-term track records for the fi rm and its major business units, and 2) use these track records to explain how their key decisions are consistent with long-term value maximization. Potential benefi ts include: 1) expedited learning by managements and boards about connections between economic performance and shareholder value; 2) abandonment of quarterly earnings as a decision guide; 3) more productive dialogue among the board, management, and investors, leading to quicker and better decisions for maximizing shareholder value; and 4) more attention by accounting rule-makers to the experiences of primary users of accounting data in dealing with measurement problems critical to wealth creation, such as the handling of intangible assets. (D21, G38, L21) ÑIn creating wealth, the corporate sector is hampered by weaknesses in two vital areas, the corporate governance system and the accounting system. Generally treated