scholarly journals The Impact of Dieselgate on the Required Rate of Return on Equity of VW, BMW and Daimler

e-Finanse ◽  
2021 ◽  
Vol 17 (1) ◽  
pp. 8-18
Author(s):  
Romana Čižinská ◽  
Pavlína Matějková ◽  
Pavel Neset
Keyword(s):  
Risk Premium ◽  
Inverse Function ◽  
Rate Of Return ◽  
Deep Dive ◽  
Return On Equity ◽  
Market Beta ◽  
Beta Coefficient ◽  
Clean Air ◽  
Equity Investments ◽  
The Impact

Abstract Our paper studies the impacts of the Dieselgate scandal on the required rate of return on equity investments into VW, Daimler, and BMW. The object of investigation is the beta coefficient that determines the risk premium in the Capital Asset Pricing Model (CAPM). Our research takes a deep dive into the developments from the turning point of the scandal (the EPA NOTICE 2015) on September 18, 2015 – when a Notice of Violation of the Clean Air Act was issued to Volkswagen by the EPA – to the end of February 2016. This period also covers FORMAL COMMENCEMENT 2016, when the U.S. Department of Justice first sued Volkswagen on behalf of the EPA. The spillover (contagion) effect of fraudulent practices of VW impacted BMW, Daimler and other companies in the industry that share a similar business model and market segment. Our research of historical market betas has not confirmed the expectation that in the context of the Dieselgate scandal the return required on equity investments into VW, Daimler, and BMW would soar. The Dieselgate scandal proves that the reliability of beta estimates is an inverse function of market volatility. Historical market beta is, therefore, not a good estimate of the required rate of return for the companies in question.

scholarly journals The Impact of Currency Risk on Firm’s Value in Emerging Countries

2019 ◽  
Vol 13 (1) ◽  
pp. 7-27
Author(s):  
Ilia Kuchin ◽  
Mariia Elkina ◽  
Yury Dranev
Keyword(s):  
South Africa ◽  
Exchange Rate ◽  
Risk Premium ◽  
Emerging Countries ◽  
Equity Capital ◽  
Cost Of Equity ◽  
Currency Risk ◽  
Return On Equity ◽  
The Cost ◽  
The Impact

This study is dedicated to estimating the impact of currency risk on the cost of equity in Brazil, Russia, India and South Africa. Our contribution to the literature is that we obtain further evidence on pricing of exchange rate risk in developing countries which for now is quite scarce. These motivates our research which is dedicated to BRICS capital markets with Chinese stock market excluded since it is heavily regulated. The aim of the research is to determine whether in emerging countries stock markets currency risk is a significant factor that influence cost of equity capital of a company. Changes in the value of exchange rate can impact cash flows of a firm and their riskiness, hence, the value of the company. In our research we will discuss the influence of exchange rate movements on the value of the firm through their impact on the cost of equity. Specifically, we investigate whether companies that report substantial currency gains or losses have to pay a higher required return on equity. Furthermore, in this study we take an attempt to estimate currency risk premia for exposure to appreciation and depreciation of currency separately and identify possible differences. For each country three models that extend Fama-French Three Factor Model by incorporating currency risk are estimated. We used equal-weighted portfolio approach to construction currency risk factors. They are estimated using information about the ratio of currency gains to sales or the magnitude of covariation between equity returns and exchange rate changes. In the second case appreciation and depreciation of domestic currency against US dollar is considered separately. Results indicate that in Russia firms which report substantial currency losses pay a positive risk premium, while in Brazil, India and South Africa companies with significantly positive or negative currency gains pay a lower required return on equity than firms with almost zero currency gains. Finally, we are trying to explain estimation results using sectoral breakdown of product exports in each country of data sample.

scholarly journals Liquidity and solvency of a company and the rate of return – an analysis of the Warsaw Stock Exchange

2020 ◽  
Vol 6 (53) ◽  
pp. 199-220
Author(s):  
Justyna Zalewska ◽  
Natalia Nehrebecka
Keyword(s):  
Least Squares Method ◽  
Stock Exchange ◽  
Financial Ratios ◽  
Rate Of Return ◽  
Rates Of Return ◽  
Developed Country ◽  
Return On Equity ◽  
Warsaw Stock Exchange ◽  
Capm Model ◽  
The Impact

AbstractThe purpose of the article is to analyse the impact of various financial ratios used to evaluate a company’s liquidity and solvency on the rates of return on the shares of companies listed on the Warsaw Stock Exchange. In the context of developing countries, the relationship between liquidity and solvency on the one hand and the return on equity on the other is still not clear. Poland is the most economically developed country in Central and Eastern Europe. A thorough analysis is necessary to take appropriate action and introduce adequate regulations in the country, as well as to create the foundation for researching other economies in this region. In addition, this article includes new estimators that have not yet been taken into account but that may affect the rates of return, which will contribute to the literature on the subject and to the development of knowledge on the volatility of returns on shares. In the study, we have calculated the time-varying beta coefficients of the capital asset pricing model (CAPM) model and analysed portfolios based on three liquidity ratios and four solvency ratios, which were computed using the CAPM, Fama–French and Carhart models. The empirical study described in the article focuses on companies listed on the Warsaw Stock Exchange in the period from 1 January 1999 to 30 June 2013. Regressions were estimated by the least-squares method and by quantile regression. Based on the results, it was found that listed companies at risk of bankruptcy are able to meet their short-term liabilities. Liquidity and solvency measured by financial ratios significantly affect the sensitivity of the rate of return on shares to the risk factors expressed in the CAPM, Fama––French and Carhart models.

scholarly journals Corporate social responsibility and firm risk: Egypt’s case

2021 ◽  
Vol 10 (2) ◽  
pp. 74-83
Author(s):  
Dina Hassouna ◽  
Rania Salem
Keyword(s):  
Developing Countries ◽  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Audit Committee ◽  
Developed Countries ◽  
Firm Risk ◽  
Return On Equity ◽  
Beta Coefficient ◽  
Corporate Social ◽  
The Impact

Studies amongst developed countries have extensively investigated the link between corporate social responsibility (CSR) and financial performance. However, due to lack of research in the Middle East, especially in Egypt, the association between CSR and firm risk remains much less understood (Nguyen & Nguyen, 2015). Therefore, this paper is one of the very few studies that investigate the impact of CSR on firm risk amongst developing countries. A sample of 31 Egyptian listed companies was examined over four years, from 2011 to 2015. We test the impact of CSR on firm risk using fixed and random effects estimation models. We use operating leverage, financial leverage and the beta coefficient of the sample companies’ stocks as a proxy for the companies’ risk. Identified control variables are firm size, market-to-book value, return on equity, return on assets, and firm age. Other variables are used to control for corporate governance, board characteristics and audit committee characteristics. The results show that CSR affects operating risk, yet it does not have a significant impact on financial or market risks in Egypt, which in turn emphasizes that CSR in developing countries differs in characteristics from that in developed countries (Vo & Arato, 2020).

scholarly journals The Role of Using CAMELS Model in Analyzing the Factors Affecting the Performance of The Jordanian Commercial Banks (2014-2019)

2021 ◽  
Vol 17 (2) ◽  
pp. 3-11
Author(s):  
Senan Amer
Keyword(s):  
Quality Management ◽  
Commercial Banks ◽  
Capital Adequacy ◽  
Rate Of Return ◽  
Return On Assets ◽  
Return On Equity ◽  
Factors Affecting ◽  
Management Efficiency ◽  
Asset Quality ◽  
The Impact

In this study, the factors affecting the performance of Jordanian commercial banks have been analyzed using the elements of the CAMELS model, along with identifying the most important factors. The study targeted the impact of twenty Jordanian commercial banks on performance-; these banks were listed on the Amman Stock Exchange during the period of 2014-2019. The researcher used the Data Pooled Regression Method, due to its relevance to the nature of the data used in the study, where this method is used in the case of a time series and cross-sectorial data. The Rate of Return on Assets and the Rate of Return on Equity were used as the two variables on which the banks’ performance was measured. However, the independent variables included the CAMELS model elements which are capital adequacy, asset quality, management efficiency, earnings, liquidity, and sensitivity to market risks, in addition to macroeconomic variables, which include the rate of economic growth and the rate of inflation. The study concluded that capital adequacy, asset quality, management efficiency, and earnings are among the most important and most influential factors with regards to the Jordanian commercial banks, which - are is represented by the Rate of Return on Assets and the Rate of Return on Equity. Moreover, the study also concluded that it is possible to derive a miniature model from the CAMELS model called the CAME model, which has a great ability to explain and measure the performance of commercial banks in Jordan. Finally, the study recommended the Central Bank of Jordan to use the CAMELS model to evaluate Jordanian commercial banks.

The impact of dividend policy on price-earnings ratio

2017 ◽  
Vol 16 (1) ◽  
pp. 125-140 ◽  
Author(s):  
Boonlert Jitmaneeroj
Keyword(s):  
Positive Relationship ◽  
Investor Sentiment ◽  
Rate Of Return ◽  
Common Finding ◽  
Annual Data ◽  
Nonlinear Relationship ◽  
Dividend Payout ◽  
Content Type ◽  
Return On Equity ◽  
The Impact

Purpose This paper aims to examine the conditional and nonlinear relationship between price-earnings (P/E) ratio and payout ratio. A common finding of previous studies using linear regression model is that the P/E ratio is positively related to the dividend payout ratio. However, none of them investigates the condition under which the positive relationship holds. Design/methodology/approach This paper uses the fixed effects model to investigate the conditional and nonlinear relationship between P/E ratio and payout ratio. With the inclusion of fundamental factors and investor sentiment, this model allows for nonlinear relationship to be conditioned on the return on equity and the required rate of return. Findings Based on the annual data of industries in the USA over the period of 1998-2014, this paper produces new evidence indicating that when the return on equity is greater (less) than the required rate of return, the P/E ratio and dividend payout ratio exhibit a negative (positive) relationship and positive (negative) convexity. Practical implications Due to the curvature relationship between P/E ratio and payout ratio, the corporate managers and stock investors should pay more attention to the reduction in payout ratio than the rising payout ratio and the companies with low payout ratios than the companies with high payout ratios. Originality/value No previous study has tackled the issue of conditional and nonlinear relationship between P/E ratio and payout ratio. This paper attempts to fill the gap by allowing for nonlinear relationship conditional on the relative values of the return on equity and the required rate of return.

The long-run stability of a small, open economy under crawling peg regime

2002 ◽  
Vol 52 (1) ◽  
pp. 57-78
Author(s):  
S. Çiftçioğlu
Keyword(s):  
Exchange Rate ◽  
Open Economy ◽  
Risk Premium ◽  
Small Open Economy ◽  
Exchange Rate Policy ◽  
Price Stability ◽  
Output Stability ◽  
Long Run ◽  
The Exchange Rate ◽  
The Impact

The paper analyses the long-run (steady-state) output and price stability of a small, open economy which adopts a “crawling-peg” type of exchange-rate regime in the presence of various kinds of random shocks. Analytical and simulation results suggest that with the exception of money demand shocks, an exchange rate policy which involves a relatively higher rate of indexation of the exchange rate to price level is likely to lead to the worsening of price stability for all types of shocks. On the other hand, the impact of adopting such a policy on output stability depends on the type of the shock; for policy shocks to the exchange rate and shocks to output demand, output stability is worsened whereas for the shocks to risk premium of domestic assets, supply price of domestic output and the wage rate, better output stability is achieved in the long run.

Relationship between Code of Corporate Governance and Corporate Financial Performance (An Empirical Study of Food Companies Listed on KSE)

GIS Business ◽  
2017 ◽  
Vol 12 (4) ◽  
pp. 01-09
Author(s):  
Asma Rafique Chughtai ◽  
Afifa Naseer ◽  
Asma Hassan
Keyword(s):  
Corporate Governance ◽  
Stock Exchange ◽  
Securities And Exchange Commission ◽  
Executive Directors ◽  
Agency Conflicts ◽  
Cross Sectional ◽  
Return On Equity ◽  
Governance Practices ◽  
Code Of Corporate Governance ◽  
The Impact

The crucial role that implementation of Code of Corporate Governance plays on protecting the rights of minorities, shareholders, local as well as foreign investors cannot be denied. Companies all over the world are required to implement their respective Code of Corporate Governance for avoiding agency conflicts between companies management and stakeholders and for assuring transparency in accountability. This paper aims at exploring the impact of implementation of corporate governance practices (designed by Securities and Exchange Commission of Pakistan) have on the financial position of companies. For explanatory variables of the study, composition of the board as per the Code of Corporate Governance that comprises of presence of independent, executive and non-executive directors has been taken into consideration. Return on equity has been taken as an indicator of firms profitability i.e. the dependent variable. For this study, companies listed on food producing sector of Karachi Stock Exchange have been screened for excogitation of the relationship. It is an empirical research based on nine years data from 2007–2015. Using Hausman Test for selecting the data analysis technique between Fixed or Random, Fixed Cross Sectional Panel Analysis has been used for analysis of the data collected. Findings indicate that presence of independent, executive and non-executive directors as per the code requirements levies a significant impact on the profitability of companies indicated by return on equity. It is, thus concluded that companies should ensure compliance with code of governance practices to reduce not only the agency issues but also to increase their profitability.

Key Aspects of Assessing Effectiveness and Efficiency of Implementation of the Federal Clean Air Project on the Example of the Comprehensive Emission Reduction Action Plan in Nizhny Tagil

2020 ◽  
pp. 48-60
Author(s):  
SV Yarushin ◽  
DV Kuzmin ◽  
AA Shevchik ◽  
TM Tsepilova ◽  
VB Gurvich ◽  
...  
Keyword(s):  
Emission Reduction ◽  
Action Plan ◽  
Local Population ◽  
Ambient Air ◽  
Ambient Air Pollution ◽  
Mortality And Morbidity ◽  
Industrial Enterprises ◽  
Clean Air ◽  
Effectiveness And Efficiency ◽  
The Impact

Introduction: Key issues of assessing effectiveness and economic efficiency of implementing the Federal Clean Air Project by public health criteria are considered based on the example of the Comprehensive Emission Reduction Action Plan realized in the city of Nizhny Tagil, Sverdlovsk Region. Materials and methods: We elaborated method approaches and reviewed practical aspects of evaluating measures taken in 2018–2019 at key urban industrial enterprises accounting for 95 % of stationary source emissions. Results: Summary calculations of ambient air pollution and carcinogenic and non-carcinogenic inhalation health risks including residual risks, evaluation of the impact of air quality on urban mortality and morbidity rates, economic assessment of prevented morbidity and premature mortality cases have enabled us not only to estimate health effects but also to develop guidelines for development and implementation of actions aimed at enhancing effectiveness and efficiency of industrial emission reduction in terms of health promotion of the local population. Conclusions: We substantiate proposals for the necessity and sufficiency of taking remedial actions ensuring achievement of acceptable health risk levels as targets of the Comprehensive Emission Reduction Action Plan in Nizhny Tagil until 2024 and beyond.

scholarly journals Volatility Modeling: An Overview of Equity Markets in the Euro Area during COVID-19 Pandemic

Mathematics ◽  
2021 ◽  
Vol 9 (11) ◽  
pp. 1212
Author(s):  
Pierdomenico Duttilo ◽  
Stefano Antonio Gattone ◽  
Tonio Di Di Battista
Keyword(s):  
Stock Market ◽  
Euro Area ◽  
Risk Premium ◽  
Stock Markets ◽  
Market Volatility ◽  
Stock Market Volatility ◽  
Volatility Modeling ◽  
The Impact ◽  
Second Wave ◽  
Daily Returns

Volatility is the most widespread measure of risk. Volatility modeling allows investors to capture potential losses and investment opportunities. This work aims to examine the impact of the two waves of COVID-19 infections on the return and volatility of the stock market indices of the euro area countries. The study also focuses on other important aspects such as time-varying risk premium and leverage effect. This investigation employed the Threshold GARCH(1,1)-in-Mean model with exogenous dummy variables. Daily returns of the euro area stock markets indices from 4th January 2016 to 31st December 2020 has been used for the analysis. The results reveal that euro area stock markets respond differently to the COVID-19 pandemic. Specifically, the first wave of COVID-19 infections had a notable impact on stock market volatility of euro area countries with middle-large financial centres while the second wave had a significant impact only on stock market volatility of Belgium.

Sign in / Sign up

Export Citation Format

Share Document