In this paper we introduce lifetime (or long-term) investor value appropriation (LIVA) to measure firm performance, defined as the ex post value of discounted cash flows over a firm’s lifetime. Unlike other commonly used measures of firm performance, such as return on assets, Tobin’s q, economic profit, or total shareholder return, LIVA captures long-term returns vis-à-vis the cost of capital, profitable growth, as well as the size of the economic impact in a single metric. Moreover, we show that LIVA can be equivalently operationalized using cash flow data, accounting profits, or shareholder return data. Finally, two exploratory empirical studies illustrate how LIVA can be operationalized and provide new strategic insights beyond currently used measures.
For this paper, we make available a
database with the LIVA by year for all publicly listed US firms from 1980 to 2015, based on the CRSP database. It is in CSV format, which can be opened in R, Stata, Excel, etc. The LIVA is calculated in billion (000,000,000) US dollars, and is indexed by the CRSP identifiers
permno and
permco. For any given company, its LIVA can be calculated by adding the annual LIVA in the database over all years in the time period of interest. The LIVA in each year has been calculated using monthly total shareholder return and market capitalization data, using the market return as the cost of equity [see equation (2) in the AoM Best Paper proceedings version of the paper]. Please refer to the paper for further details on calculating and interpreting LIVA.
A short version of the paper has been published in the AoM Best Paper proceedings 2017, and a full version is available from the authors. Please cite the paper when using these data, and reach out to the authors for any questions. The database can be downloaded under
Related.