THE JOURNAL OF INDUSTRIAL ECONOMICS 0022-1821 S2.00 Volume XXXVIII Decem ber 19 89 N o . 2 FIRMS AS PORTFOLIOS: A MEAN-VARIANCE ANALYSIS OF UNQUOTED UK COMPANIES* DONALD A. HAY AND HELEN LOURI This paper adopts a mean-variance portfolio framework to model the balance sheet behaviour of unquoted companies with respect to choice items such as fixed investment, investment in stocks, trade credit, and borrowing. Econometric results for a sample of 39 UK firms are consistent with many of the restrictions implied by portfolio theory, in particular that these balance sheet items are jointly determined. L INTRODUCTION THE IDEA motivating the research reported in this paper is that unquoted firms may usefully be analysed as portfolios of assets and liabilities. The assets are the physical capital, stocics and woric in progress, net trade credit, and working capital of the firm; the main liabilities are loans. The "size" of the portfolio, and hence the size of the firm, is constrained by the availability of shareholder funds, both share issues and retained profits. This is one reason for the focus on unquoted firms: in principle, quoted firms can resort to new issues to increase their capital base. Another distinction between quoted and unquoted firms makes the choice of unquoted firms for analysis partictilarly significant. In unquoted firms the owners' eqtiity in the firm is likely to be a major portion of their total wealth. Hence their personal preferences and risk aversion will be major infiuences on the overall shape and riskiness of the balance sheet. The influence will be straightforward in the case where the owners also work in the firm and draw a salary as executive directors or managers. The firm will represent a substantial proportion not only of non-human wealth, but also of their human wealth, much of which is specific to the firm. By contrast, the shareholders in a quoted firm are likely to hold equity as part of a diversified portfolio of wealth. In a capital asset pricing model framework they will be interested in the covariance risk of the holding, and be much less concerned about the risk profile of a single firm's balance sheet. This contrast may be weakened by the fact that the managers of a quoted firm are in a situation comparable to that of owner-managers of unquoted firms in respect of * We are grateful to S . Holder, w ho assisted in the compilatioo of the company data, to J. Zour

Firms as Portfolios

Download PDF Report

Upload
julius-mathias
View
225
Download
0

Embed Size (px)

Citation preview

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 1/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 2/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 3/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 4/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 5/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 6/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 7/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 8/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 9/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 10/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 11/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 12/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 13/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 14/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 15/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 16/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 17/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 18/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 19/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 20/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 21/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 22/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 23/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 24/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 25/26

8/8/2019 Firms as Portfolios

http://slidepdf.com/reader/full/firms-as-portfolios 26/26

Fot Webinar - Managers as Career Agents for Their Employees - Portfolios

Business

HSBC Portfolios€¦ · HSBC Portfolios HSBC Portfolios HSBC Portfolios HSBC Portfolios HSBC Portfolios World Selection 1 World Selection 2 World Selection 3 World Selection 4 World

Documents

HSBC Portfolios - FS - AR - 31.01 Portfolios HSBC Portfolios HSBC Portfolios HSBC Portfolios HSBC Portfolios World Selection 1 World Selection 2 World Selection 3 World Selection 4

Documents

Portfolios as a method of student assessmentctld.kau.edu.sa/Files/322/Files/154767_Theme 4 Guide 24 Portfolios f… · -3 - Portfolios as a method of student assessment This guide

Documents

Assessment Portfolio S2005 - Rodney D. Keller … different types of portfolios such as writing portfolios or reading portfolios. In a reading portfolio students would add: an introduction

Documents

SIA Firms as at 31 July 2021

Documents

TOBIN'S Q,CORPORATE...We show further that diversified firms have lower q's than equivalent portfolios of specialized firms. This negativerelation holds throughout the 1980s in our

Documents

International Audit Firms as Strategic Networks – The ...emnet.univie.ac.at/fileadmin/user_upload/conf_EMNet/2005/papers/... · International Audit Firms as Strategic Networks –

Documents

Portfolios as Records of Personal Learning

Documents

Electronic Portfolios as Job Search Tools: Perspectives

Documents

Portfolios as a method of student assessmentmedfac.tbzmed.ac.ir/uploads/3/CMS/user/file/10/Am... · -3 - Portfolios as a method of student assessment This guide informs medical teachers

Documents

Identifying Expectation Errors in Value/Glamour Strategies ... · result, glamour portfolios consist of a disproportionate share of overvalued firms and value portfolios contain a

Documents

Small Business Development Certified Firms as of …...Small Business Development Certified Firms as of November 13, 2017 Page: 1 (Alphabetical Listing by Trade Category) * Firms that

Documents

Using Stocks or Portfolios in Tests of Factor Models · of portfolios constructed by Fama and French (1993) and others, the ﬁrst method of using portfolios as test assets is the

Documents

Small Business Development Certified LDB Firms as of ... · Small Business Development Certified LDB Firms as of November 13, 2017 Page: 1 DBDR0050 v.20160307 * Firms that have timely

Documents

Portfolios as a method of student assessment · Portfolios as a method of student assessment This guide informs medical teachers about the use of portfolios for the purpose of student

Documents

Supporting Reflection in The ePortfolio as a Story ...electronicportfolios.org/portfolios/ReflectionUBC.pdf · 1 Supporting Reflection in Electronic Portfolios: Blogs, Wikis and Digital

Documents

Highmore Dynamic Liquidity Portfolios · Highmore’s team hasexperience and a long-shared history at firms such as Man Group, FrontPoint Partners, Bank of America Merill Lynch, Citigroup

Documents

Me-portfolios and T-portfolios

Education

Blogs as Web-Based Portfolios - The Thinking Stick

Documents

TR15/12: Wealth management firms and private banks ... · and private banks Suitability of investment portfolios ... Firms providing portfolio management services to ... investment-management-limited

Documents

Product Differentiation and Firm Size Distribution: An ...sticerd.lse.ac.uk/dps/ei/ei31.pdf · Remarkably, product differentiation resulting from firms acquiring various portfolios

Documents

CHAPTER 4 Ethnic Identity Positioning at Work ... 4.pdf · 4.1.1. Careers in professional service firms. Professional service firms, such as law firms, management consulting firms,

Documents

PATENT PORTFOLIOS AND FIRMS ... - economia.unipd.it · Patent Portfolios and Firms Technological Choices∗ StefanoComino†, FabioM.Manenti ‡ June18,2020 Abstract In many industrial

Documents

Portfolios as Pedagogy

Education

Firms List as on 01.09

Documents

Electronic Portfolios as a Summative Assessment Team Purple – Todd Taylor

Documents

STANDARD PMS Portfolios-ReadyToInvest Portfolios

Documents

Random Portfolios for Evaluating Trading Strategies · Random Portfolios for Evaluating Trading Strategies ... portfolios provide a rigorous test of the trading strategy as a

Documents

Firms as Tax Collectors - pablogarriga.github.io

Documents