No . 2005–57 ROYAL AHOLD: A FAILURE OF CORPORATE GOVERNANCE AND AN ACCOUNTING SCANDAL By Menneskeabe de Jong, Douglas Versus. DeJong, Gerard Mertens, Philip Roosenboom Mar 2005

ISSN 0924-7815

Regal Ahold: A Failure of Corporate Governance and an Accounting Scandal

Abe de Jong* Department of economic Management Erasmus University Rotterdam a. [email protected] eur. nl Douglas Versus. DeJong Tippie College of Business University of New jersey [email protected] edu Gerard Mertens Department of economic Management Erasmus University Rotterdam g. [email protected] eur. nl Peter Roosenboom Department of economic Management Erasmus University Rotterdam [email protected] eur. nl

Current Draft: 03 11, june 2006 Keywords: worldwide economics, economical economics, economic reporting, regulation and economics, corporate governance, regulation. JEL Classification Numbers: F36, G38, K22, M40 * Related author. Erasmus University Rotterdam, Department of economic Management, Room F4-32, L. O. Field 1738, 3000 DR Rotterdam, The Netherlands; phone +31-10-4081022. The authors would like to thank Ambito Becht, Willem Buijink, Paul Frentrop, Reggy Hooghiemstra, Bruce Johnson, Costs Kinney, Miriam Koning, Mark Penno, Willem Schramade, Roy Suddaby and Bart van Halder intended for helpful comments and Shan-Twan The for excellent research assistance.

Regal Ahold: A Failure of Business Governance and an Accounting Scandal

FUZY Royal Ahold (Koninklijke Ahold NV) was one of the major successes in the 1990s and is one of the main failures, enduring a complete crisis, in 2003. We check out the approach, accounting visibility and corporate governance of Ahold; elements which jointly travel the firm's performance over this period of time. In general, the organization governance, accounting transparency, approach and company performance interactions are sophisticated. There is not a fully specified model available to addresses the inter-relationships, including the endogeneity problem. The econometrics happen to be difficult and constrained not merely by the deficiency of a fully particular theory but also by data availability. Our specialized medical study triumphs over these challenges by providing a great in-depth research of the inter-relationships among company governance, accounting transparency and strategy that lead to Ahold's downfall. We provide ideas into these relationships and the complexity that present theory and scientific studies are not able to address.

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1 . Introduction The rise and show up of Noble Ahold (Koninklijke Ahold NV) is an important function in corporate governance and accounting. Headquartered in the Netherlands, Ahold is one of the world's greatest international price tag grocery and food support companies. At its peak in 2001, Ahold's reported sales and profits were €66. 6 billion dollars and €1. 1 billion and this operated five, 155 stores in 28 countries with nearly one fourth of a mil employees. Ahold began as being a family organization in 1887 and travelled public in 1948. Ahold was a family-controlled business underneath the Heijn relatives, operating primarily in the Netherlands for over 100 years. In 1989, Ahold underneath went a transition via a family-controlled to a managementcontrolled firm. Following this transition, Ahold experienced an extraordinary period of success. It generated over a one particular, 000% return for its shareholders and had a market capitalization of €30. 6th billion simply by November 2001. In Feb . 2003, Ahold suffered a total meltdown. The following period identified a firm in complete disarray: a failed technique, an accounting scandal, the firing of professional management, and a lawsuit filings from all parts on the planet. Shareholders lost most of all their returns made since 1989. Ahold shattered the illusion that corporate governance and accounting were U. S. problems; Ahold became " Europe's Enron” (The Economist, March 1, 2003). It brought on Dutch and European policymakers to think again about their method of corporate governance and accounting policy. Inside the Netherlands, a committee in corporate governance was installed on March 12,...

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