Accepted Paper:

Testing Asset Values: Financialization, Organization and the Emergence of Asset Impairment Rules  

Authors:

Andrea Mennicken (London School of Economics and Political Science)
Yuval Millo (University of Leicester)

Paper short abstract:

Inherent to assets being realized is the issue of their valuation. The ability to generate a legitimate knowledge claim about asset valuation depends on successfully relating a body of knowledge to a would-be asset. How do organizations develop and justify calculations through which assets are valued?

Paper long abstract:

This paper uses the case of asset impairment testing to draw out a specific historical episode of the ways in which the boundaries between markets and organizations, and between external and internal reporting, are being blurred and new categories for asset valuation are being established. Tracing the history of impairment testing rules in the UK, based on archival research and interviews, we argue that standardized impairment tests are an important vehicle in the financialization of asset valuation, and organizations respectively. Combining managerial and market-based valuation approaches, impairment tests put the accounting for asset value at the interface between markets and organizations. Managers are being made aware of the importance of markets through the implication of market-based information in organizational impairment valuations. At the same time, market-based information becomes more managerialized. In tracing the intertwinement of managerial knowledge and market-based information in asset impairment tests, we highlight that financialization is not a one-way process, where finance and financial markets capture and colonize organizations. In impairment tests, market-generated numbers are combined and hybridized with organizationally generated managerial estimates. We highlight the eclectic nature of impairment valuations and the relevance of accounting technologies for bringing market-oriented asset valuation about. In so doing, the paper adds not only to our understanding of the dynamics underlying the emergence and change of asset conceptualizations. It also contributes more broadly to the sociology of economic valuation, by shedding light on the different forms of calculability engrained in the establishment of asset value.

Panel T005
Turning Things into Assets