Rates of Return on Corporate Investment: An International Comparison
Versandkostenfrei!
Versandfertig in 1-2 Wochen
38,00 €
inkl. MwSt.
PAYBACK Punkte
0 °P sammeln!
Doctoral Thesis / Dissertation from the year 1996 in the subject Business economics - Investment and Finance, grade: 1,0, University of Vienna (Sozial- und Wirtschaftswissenschaften), language: English, abstract: Inhaltsangabe:Abstract:In the 1980s many U.S. companies restructured. This was a reaction to the striking deterioration in the performance of 1970s. In the 1990s studies emerged making similar observations for the European companies (De Jong, 1995). Explanations for this poor performance often focus an the quality of corporate investment decisions. In particular, several authors (Marr...
Doctoral Thesis / Dissertation from the year 1996 in the subject Business economics - Investment and Finance, grade: 1,0, University of Vienna (Sozial- und Wirtschaftswissenschaften), language: English, abstract: Inhaltsangabe:Abstract:
In the 1980s many U.S. companies restructured. This was a reaction to the striking deterioration in the performance of 1970s. In the 1990s studies emerged making similar observations for the European companies (De Jong, 1995). Explanations for this poor performance often focus an the quality of corporate investment decisions. In particular, several authors (Marris, 1964; Mueller, 1972) suggested convincing theoretical arguments which were backed with empirical support (Baumol et al (1970), Grabowski and Mueller (1975), Shinnar et al (1989), and Mueller and Reardon (1993)) that managerial discretion was at the heart of this problem.
This paper provides estimates of rates of return an investment using a newly developed efficient markets approach by D.C. Mueller and E. Reardon (1993). This technique relates a firm's investment performance relative to cost over a given period of time to the change in its market value. Making assumptions about efficiency of the capital markets and depreciation, it enables to infer a rate of return relative to the cost of funds which are used to finance investment. We present this measure of investment performance (c) for 2868 companies from 27 countries over the 1984--1994 period. Though estimates for the whole sample show a large fraction of firms earning returns to investment below the opportunity cost of capital for their owners over the last decade, individual countries and industries demonstrated considerable heterogeneity in investment performance.
The results suggest for the U.S. a better investment performance in the last decade than over the 1970s. The best performance comes from the Asian companies, whereas the European and Scandinavian companies occupy a place between these two country groups.
In addition to this, we can make three important observations. First, we are able to establish strong empirical evidence that a large number of companies in the sample have invested above the levels that were consistent with shareholder wealth maximization in the last decade. Second, this overinvestment problem is more pronounced for the European and Anglo-Saxon companies. And, third, low returns an investment are highly correlated with the use of internally generated funds. The companies that make greater use of the external capital markets have an average higher returns an their investments.
Inhaltsverzeichnis:Table of Contents:
Acknowledgements3
Abstract4
List of Tables6
Introduction7
1.Review of the Literature an the Returns to Corporate Investment11
2.Calculation of the Rates of Return On Corporate Investment21
2.1The Methodology21
2.2The Data33
2.3The Results33
3.Discussion
3.1The Efficient Markets Hypothesis42
3.2The Sample Period44
3.3Depreciation47
4.Estimation of Depreciation and Returns an Corporate Investment
4.1The Methodology53
4.2Cross-Section Estimates65
5.Financing Decisions and Returns an Different Sources of Investment
5.1Returns an Different Sources of Investment70
5.2Free Cash Flow Hypothesis and Returns an Investment81
6.Summary and Concluding Remarks
6.1Summary86
6.2Implications for Investment Policy88
6.3Implications for Corporate Governance91
Appendices
Data and Calculation of Variables94
Bibliography97
In the 1980s many U.S. companies restructured. This was a reaction to the striking deterioration in the performance of 1970s. In the 1990s studies emerged making similar observations for the European companies (De Jong, 1995). Explanations for this poor performance often focus an the quality of corporate investment decisions. In particular, several authors (Marris, 1964; Mueller, 1972) suggested convincing theoretical arguments which were backed with empirical support (Baumol et al (1970), Grabowski and Mueller (1975), Shinnar et al (1989), and Mueller and Reardon (1993)) that managerial discretion was at the heart of this problem.
This paper provides estimates of rates of return an investment using a newly developed efficient markets approach by D.C. Mueller and E. Reardon (1993). This technique relates a firm's investment performance relative to cost over a given period of time to the change in its market value. Making assumptions about efficiency of the capital markets and depreciation, it enables to infer a rate of return relative to the cost of funds which are used to finance investment. We present this measure of investment performance (c) for 2868 companies from 27 countries over the 1984--1994 period. Though estimates for the whole sample show a large fraction of firms earning returns to investment below the opportunity cost of capital for their owners over the last decade, individual countries and industries demonstrated considerable heterogeneity in investment performance.
The results suggest for the U.S. a better investment performance in the last decade than over the 1970s. The best performance comes from the Asian companies, whereas the European and Scandinavian companies occupy a place between these two country groups.
In addition to this, we can make three important observations. First, we are able to establish strong empirical evidence that a large number of companies in the sample have invested above the levels that were consistent with shareholder wealth maximization in the last decade. Second, this overinvestment problem is more pronounced for the European and Anglo-Saxon companies. And, third, low returns an investment are highly correlated with the use of internally generated funds. The companies that make greater use of the external capital markets have an average higher returns an their investments.
Inhaltsverzeichnis:Table of Contents:
Acknowledgements3
Abstract4
List of Tables6
Introduction7
1.Review of the Literature an the Returns to Corporate Investment11
2.Calculation of the Rates of Return On Corporate Investment21
2.1The Methodology21
2.2The Data33
2.3The Results33
3.Discussion
3.1The Efficient Markets Hypothesis42
3.2The Sample Period44
3.3Depreciation47
4.Estimation of Depreciation and Returns an Corporate Investment
4.1The Methodology53
4.2Cross-Section Estimates65
5.Financing Decisions and Returns an Different Sources of Investment
5.1Returns an Different Sources of Investment70
5.2Free Cash Flow Hypothesis and Returns an Investment81
6.Summary and Concluding Remarks
6.1Summary86
6.2Implications for Investment Policy88
6.3Implications for Corporate Governance91
Appendices
Data and Calculation of Variables94
Bibliography97
Andere Kunden interessierten sich für
