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KONEČNÝ, Z. ZINECKER, M.
Original Title
Corporate Life Cycle Identification: A Model Based on Relationship Between Return on Equity and Cost of Equity
Type
journal article in Scopus
Language
English
Original Abstract
The theory of shareholder value maximisation implies that the ultimate aim of each entrepreneur is to increase the market value of the company, i.e. to maximise the wealth of shareholders. This concept assumes that the returns to shareholders should outperform the cost of capital. The higher the spread is, the better the position of shareholders. The capital assets pricing model has been very often used for calculation the cost of equity as implicit costs, where the risk-free rate, the expected return of the market and the premium to operational and financial risks in the form of beta coefficient is considered. Moreover, the return on equity is significantly dependent on the corporate life cycle. The purpose of this paper is to develop an innovative model identifying stages of the corporate life cycle while using two variables: the rate of economic profit and the share of operational and financial risk within the total entrepreneurial risk. The model is verified by using data of a selected company. Identifying stages of the corporate life cycle should simplify the risk management and subsequently raise the capital access.
Keywords
cost of equity, financial risks, operational risks, rate of economic profit, return on equity
Authors
KONEČNÝ, Z.; ZINECKER, M.
Released
7. 12. 2017
Publisher
University of Pardubice, Faculty of Economics and Administration
Location
Pardubice
ISBN
1211-555X
Periodical
Sborník vědeckých prací University Pardubice
Year of study
XXIV
Number
41
State
Czech Republic
Pages from
67
Pages to
78
Pages count
12
URL
http://hdl.handle.net/10195/69594
BibTex
@article{BUT142911, author="Zdeněk {Konečný} and Marek {Zinecker}", title="Corporate Life Cycle Identification: A Model Based on Relationship Between Return on Equity and Cost of Equity", journal="Sborník vědeckých prací University Pardubice", year="2017", volume="XXIV", number="41", pages="67--78", issn="1211-555X", url="http://hdl.handle.net/10195/69594" }