What explains the value premium? The case of adjustment costs, operating leverage and financial leverage

2015 ◽  
Vol 59 ◽  
pp. 350-366 ◽  
Author(s):  
Viet Nga Cao
Keyword(s):  
Adjustment Costs ◽  
Value Premium ◽  
Financial Leverage ◽  
Operating Leverage

scholarly journals Determining Force behind Value Premium: The Case of Financial Leverage and Operating Leverage

2020 ◽  
Vol 13 (9) ◽  
pp. 196
Author(s):  
Hafiz Muhammad Zia ul haq ◽  
Muhammad Sohail Shafiq ◽  
Muhammad Kashif ◽  
Saba Ameer
Keyword(s):  
Stock Returns ◽  
Financial Distress ◽  
Stock Exchange ◽  
Systematic Risk ◽  
Theoretical Models ◽  
Value Premium ◽  
Financial Leverage ◽  
Investment Activity ◽  
Book To Market Ratio ◽  
Operating Leverage

The determining force behind the value premium is the matter of debate among the researchers. Some are of the opinion that the financial distress risk determines value premium whereas other theorize that value premium is basically the compensation for operating leverage (investment activity risk). This research provides empirical evidence on this theoretical contradiction by investigating the relationships of financial leverage (FL) and operating leverage (OL) with stock returns, the book to market ratio (B/M), and systematic risk on non-financial sector firms trading at the Pakistan stock exchange (PSE). This research empirically finds significant and direct influence of operating leverage on stock returns, the book to market ratio, and systematic risk respectively. Overall findings provide support for the theoretical models which have a linked book to market effect with operating leverage. Thus, we conclude that investment activity risk seems to be the major factor that determines value premium.

scholarly journals The Effect of Financial Leverage, Operating Leverage and Current Ratio on Profitability at PT. Manunggal Persada Jakarta

2019 ◽  
Vol 3 (2) ◽  
pp. 135
Author(s):  
Waluyo Jati
Keyword(s):  
Hypothesis Testing ◽  
Regression Coefficient ◽  
Sampling Technique ◽  
Coefficient Of Determination ◽  
Analysis Tool ◽  
Financial Leverage ◽  
Current Ratio ◽  
Independent Variable ◽  
Operating Leverage

Funds can be obtained from company owners or from outside parties. The purpose of this study was to determine the effect of financial leverage, operating leverage and current ratio on profitability at PT. Manunggal Persada Jakarta. The method used in this research is descriptive with an associative approach, the sampling technique used is proportional random sampling using the census or saturated sampling method with a sample of 7 years of financial statements. The analysis tool uses classical assumption testing, regression testing, determination coefficient testing and hypothesis testing. The results of the study concluded that the regression coefficient value of Financial leverage of 0.005 was positive with a contribution of 19.3%. Hypothesis testing obtained a significance value of 0.324> 0.05. Regression coefficient value of Operating leverage of 0.001 is positive with a contribution of 16.5%. Hypothesis testing obtained a significance value of 0.368> 0.05. Current coefficient regression value of 0.158 is positive with a contribution of 31.9%. Hypothesis testing obtained a significance value of 0.187> 0.05. Obtained a regression equation Y = 0.110 + 0.009X1 + 0.001X2 + 0.177X3, the regression coefficient value of each positive independent variable with a correlation of 0.927 and a coefficient of determination of 85.8% while the remaining 14.2% is influenced by other factors. Hypothesis testing obtained by calculating Fcount> Ftable or (6.064> 4.120). Thus simultaneously there is a positive and significant effect between financial leverage, operating leverage and current ratio to rentability.

scholarly journals ANALISIS PENGARUH CAPITAL/LABOUR INTENSIVE, INVESTASI, KEPEMILIKAN MANAJERIAL, LEVERAGE OPERASI DENGAN VARIABEL MEDIASI KEBIJAKAN DIVIDEN DAN LEVERAGE KEUANGAN TERHADAP NILAI PERUSAHAAN

2017 ◽  
Vol 1 (1) ◽  
pp. 1-21 ◽  
Author(s):  
Robi Nugraha
Keyword(s):  
Path Analysis ◽  
Firm Value ◽  
Stock Exchange ◽  
Financial Sector ◽  
Managerial Ownership ◽  
Financial Leverage ◽  
Panel Data Regression ◽  
Data Regression ◽  
Result Show ◽  
Operating Leverage

ABSTRACT The purpose of this study was to analyze the influence of capital labour intensive, investment, managerial ownership, operating leverage, dividen and financial leverage on the firm value of Indonesia non financial sector companies, the influence of capital labour intensive, investment, managerial ownership, operating leverage variable on dividen and financial leverage of Indonesia non financial sector companies, and the influence of capital labour intensive, investment, managerial ownership, operating leverage variable on the firm value through dividen and financial leverage as intervening variable. The research data was collected using purposive sampling method to the data of non financial sector companies listed on the Indonesian Stock Exchange during the period 2003-2012. Based on the criteria of the study obtained 310 samples were then analyzed Using the panel data regression and path analysis. The results show that the capital labour intensive, investment, managerial ownership, operating leverage, dividen and financial leverage have significant influences on the firm value of Indonesia non financial sector companies. The capital labour intensive, investment, managerial ownership, operating leverage variable do not have significant influences on dividen. The capital labour intensive, investment, managerial ownership, operating leverage variable have significant influences on financial leverage. With path analysis, the result show the The capital labour intensive, investment, managerial ownership, operating leverage variable do not have significant influence on the firm value of Indonesia non financial sector companies with dividen and financial leverage as intervening variable. Keywords: Capital Labour Intensive, Investment, Managerial Ownership, Operating Leverage, Dividen and Financial Leverage, Firm Value.

scholarly journals ANALISIS PENGARUH FAKTOR MIKRO EKONOMI TERHADAP RISIKO INVESTASI SAHAM PADA SEKTOR INDUSTRI MAKANAN DAN MINUMAN DI BURSA EFEK INDONESIA

Widya Amerta ◽  
2019 ◽  
Vol 6 (2) ◽  
Author(s):  
Made Santana Putra Adiyadnya ◽  
I Gede Rihayana ◽  
Putu Agus Eka Rismawan ◽  
Bagus Nyoman Kusuma Putra
Keyword(s):  
Exchange Rate ◽  
Capital Market ◽  
Stock Exchange ◽  
National Development ◽  
Investment Risk ◽  
Financial Leverage ◽  
Beverage Industry ◽  
Food And Beverage Industry ◽  
Food And Beverage ◽  
Operating Leverage

The Indonesian Capital Market has an important role in the mobilization of funds for national development. The capability of the Indonesian Capital Market in mobilizing funds has become an important container besides banking to provide funds through the sale of shares and bonds. The counting of return and risk are two important things in any capital or fund to be invested. Investment risk generally is affected by micro and macro factors. The purpose of this research is to analyze how the effect of financial leverage, operating leverage and company liquidity simultaneously and partially to share investment risk on the food and beverage industry in Indonesia stock exchange period 2013-2017. The result of this research were the variable of economic conditions, interest rate, inflation, exchange rate, financial leverage, operating leverage and company liquidity simultaneously have a significant effect to share investment risk on the food and beverage industry in Indonesia stock exchange period 2013-2017 and the variable of exchange rate with financial leverage variable has a negative and significant effect to share investment risk on the food and beverage industry in Indonesia stock exchange period 2013-2017.

scholarly journals Financial Performance of Indian Pharmaceutical Companies: Analysis of Leverage and Cost of Capital

2020 ◽  
Vol 1 (1) ◽  
pp. 13-22
Author(s):  
Ahmed Mahdi Abdulkareem
Keyword(s):  
Cost Of Capital ◽  
Investment Decision ◽  
Financial Statements ◽  
Annual Reports ◽  
Pharmaceutical Companies ◽  
Financial Leverage ◽  
Significant Difference ◽  
The Cost ◽  
Operating Leverage ◽  
Practical Implications

Purpose: The main aim of the study is to examine the performance of selected pharmaceutical companies in India based on the Degree Of Operating Leverage, Degree Of Financial Leverage, Degree Of Combined Leverage, and Cost Of Capital. Approach/Methodology/Design: Five pharmaceutical companies were randomly selected, and the annual reports and financial statements of these companies were analyzed. The analysis methods involved Degree Of Operating Leverage, Degree Of Financial Leverage, Degree Of Combined Leverage, and Cost Of Capital. ANOVA test was also employed to test hypotheses. The study is made for five years from 2013-14 to 2017-18. Findings: The results of the study reveal that there is a significant difference in the (means) variables in terms of leverage (operating, finance, and combined) and cost of capital. All leverages are different to each other and the cost of capital. The analysis reveals that Sun Pharma performed well during the study period, whereas Lupin underperformed in all aspects. Practical Implications: The leverage and cost of capital are very important components for deciding whether to invest or not in pharmaceutical companies. The present study highlights the financial performances and growth of the selected pharmaceutical companies. Originality/value: The results of the paper give certain indicators about the performance of the selected companies. These indicators can be used to inform an investment decision.

scholarly journals PENGARUH LEVERAGE TERHADAP INCOME SMOOTHING DAN STOCK RETURN (Studi Pada Perusahaan Jasa Sektor Perbankan Yang Terdaftar di BEI Periode (2010-2015)

2019 ◽  
Vol 6 (2) ◽  
pp. 24
Author(s):  
Tia Maimanah
Keyword(s):  
Stock Return ◽  
Partial Least Square ◽  
Income Smoothing ◽  
Least Square ◽  
Financial Leverage ◽  
Purposive Sampling ◽  
Operating Leverage

Penelitian ini bertujuan untuk menguji pengaruh leverage terhadap income smoothing dan stock return pada perusahaan jasa sektor perbankan yang terdaftar di BEI selama periode 2010 sampai dengan 2015. Populasi dalam penelitian ini adalah semua perusahaan jasa sektor perbankan yang terdaftar di BEI. Sampel penelitian ini menggunakan metode purposive sampling sehingga hanya yang memenuhi kriteria tertentu yang akan dijadikan sampel. Jenis penelitian ini tergolong dalam explanatory research yang menerangkan suatu penelitian berdasarkan teori-teori tertentu sehingga terkumpul berbagai generilasisi empiris. Analisa data dalam penelitian ini menggunakan PLS (partial least square). Hasil penelitian ini menunjukkan bahwa operating leverage berpengaruh secara singifikan terhadap stock return dan financial leverage berpegaruh secara signifikan terhadap income smoothing. Tetapi operting leverage tidak berpengaruh secara siginifikan terhadap inocme smoothing dan financial leverage tidak berpengaruh secara siginifikan terhadap stock return. Serta operting leverage dan financial leverage tidak berpengaruh terhadap stock retrun melalui income smoothing

scholarly journals The DOL-DFL Nexus: The Relationship between the Degree of Operating Leverage (DOL) and the Degree of Financial Leverage (DFL)

2021 ◽  
Vol 13 (6) ◽  
pp. 71
Author(s):  
Marco A. Paganini
Keyword(s):  
Business Case ◽  
Great Effort ◽  
Stress Tests ◽  
Financial Leverage ◽  
Business Context ◽  
Robust Model ◽  
The Right ◽  
Operating Leverage ◽  
The Relationship

In the present paper, I have modelled the Degree of Operating Leverage (DOL) and the Degree of Financial Leverage (DFL) using the percentage variations of the economic quantities. I devoted a great effort to encompass the investment dynamic and its financing mix to design a robust model implementable in a business context. The relationship discovered between DOL and DFL is complex and manifold: first, it appears asymmetrical because DOL can influence DFL, but the former is unrelated to the latter. Second, there is an infra-annual relationship measurable through partial derivatives. Finally, the stress tests shed light on some long-term impacts of one-off shocks even when the steady-state conditions are restored, disclosing an inter-annual relationship. The DOL-DFL nexus appears to be negatively related, but I also discovered positive relations and unrelated conditions. As argued in the economic literature, they cannot always behave as substitutes. The mathematical DOL-DFL model developed can admit positive, negative, and unrelated relations even though management might intervene to choose the right combination. Also, the Business Case shows positive and negative relationships, both at the infra-annual and inter-annual levels. The DOL-DFL nexus depends on circumstances and management decisions. Empirical evidence should find how management uses such a nexus and how effective such decisions have been over time.

scholarly journals Pengaruh Degree of Operating Leverage dan Degree of Financial Leverage terhadap Return On Equity

2021 ◽  
Vol 1 (2) ◽  
pp. 22-31
Author(s):  
Ade Nahdiatul Hasanah
Keyword(s):  
Financial Leverage ◽  
Return On Equity ◽  
Purposive Sampling ◽  
Operating Leverage

Penelitian ini bertujuan untuk mengetahui pengaruh leverage dalam pendanaan terhadap tingkat keuntungan yang diperoleh pada perusahaan manufaktur di sektor makanan dan minuman yang terdaftar di Bursa Efek Indonesia periode 2010-2014. Penelitian menggunakan teknik analisis regresi berganda. Sampel penelitian sebanyak lima perusahaan dengan menggunakan metode purposive sampling. Data yang digunakan dalam penelitian adalah data sekunder berupa laporan tahunan dan keuangan. Berdasarkan hasil penelitian dapat disimpulkan bahwa operation leverage dan financial laverage berpengaruh negatif namun tidak siginifikan terhadap return on equity. Adapun di antara proxy leverage pendanaan yang digunakan, yang paling dominan pengaruhnya adalah financial leverage.

scholarly journals THE IMPACT OF DEGREE OF FINANCIAL LEVERAGE AND DEGREE OF OPERATING LEVERAGE ON THE SYSTEMATIC RISK OF COMMON STOCK

2020 ◽  
Vol 4 (1) ◽  
pp. 24-32
Author(s):  
Khadija Younas ◽  
Muhammad Sarmad
Keyword(s):  
Systematic Risk ◽  
Regression Technique ◽  
Securities Market ◽  
Financial Leverage ◽  
Wealth Maximization ◽  
Independent Variables ◽  
Risk Return ◽  
Operating Leverage ◽  
The Impact

The aim of this study is that the to evaluate the effect of financial leverage and operating leverage on the systematic risk of stock. In trendy competitive business era, the power to extend come of the firm is usually depends on economical use of leverage within the capital structure. Leverage is outlined as an extended term debt funding that improves the permanent financial performance yet because the success of the organization. It conjointly explained because the use borrowed funds to ascertain investment and come thereon investment however it’s a lot of risky if they can’t be ready to generate higher rate of come in compare with value of capital. For this reason, the determination of the proportion of debt and equity is one in every of the foremost essential choices that the organization faces, and any variability in leverage will influence a company’s monetary capability, risk, return, investment, strategic call and therefore the wealth maximization of organization. During this study, financial leverage and operating leverage as independent variables and systematic risk because the variable is considered. This study used a quantitative analysis style. The population of the study was created from the 8 cement industries of Pakistan. The study used secondary knowledge that was obtained from the annual audited monetary statements that had audited and revealed by securities market of Pakistan for an amount of five years between 2014 and 2019. This study used a correlation analysis and a multiple rectilinear regression technique in analyzing the collected knowledge. The study found that financial leverage and operating leverage had a big positive relationship with systematic risk of stock. This study covers that financial leverage and operating leverage have an immediate result on the systematic risk of stock in a very companies’ come. The study counseled that management of corporations listed at the securities market to draw in smart management therefore to beat the danger of stock. Whereas important at ≤ 0/05 H0 hypothesis, is rejected. Otherwise, there’s no different adequate reason for rejecting H0 hypothesis. For testing the hypothesis of this study, rectilinear regression technique has been used. In step with the results obtained, H0 is rejected because of important = zero.00< 0.05. This analysis is 100% because of all knowledge is collected from the correct places.

Can Operating Leverage Be the Cause of the Value Premium?

CFA Digest ◽  
2011 ◽  
Vol 41 (1) ◽  
pp. 24-26
Author(s):  
Yazann S. Romahi
Keyword(s):  
Value Premium ◽  
Operating Leverage
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