A practical method to estimate the cost of equity capital for a firm using cluster analysis

Ingram, Marcus Allan; Margetis, Speros

doi:10.1108/03074351011014569

Cited by 12 publications

(11 citation statements)

References 13 publications

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“…Recently, Ingram and Margetis (2010) presented a method to form groups of comparable companies with the help of cluster analysis.…”

Section: Discussion Of the Techniquementioning

confidence: 99%

“…The main challenge in estimating the cost-of-capital for a business unit is that the capital market data required for a regular determination of beta are not available (Chua et al 2006;Ingram and Margetis 2010). The reason is that business units are normally not listed on the stock market, but only the company as a whole.…”

Section: Cost-of-capital Of Business Units and Projectsmentioning

confidence: 98%

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Background: Cost-of-Capital in the Finance Literature

Schlegel¹

2015

Contributions to Management Science

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The literature review in this thesis is distributed over two chapters. The aim of Chap. 2 is to discuss literature from the field of cost-of-capital. This is necessary as a foundation for the subsequent chapter, which is more application-oriented. In Chap. 3, previous empirical results on companies' cost-of-capital practices are discussed. Research gaps will be identified at the end of that chapter.This chapter is structured as follows: In Sect. 2.1, the broader field of company cost-of-capital is discussed. This includes a brief discussion of traditional seminal papers as a foundation for the rest of the literature review as well as a review of contemporary discussions about general issues of cost-of-capital, such as alternative determination models and the consideration of unsystematic risk. Section 2.2 shows how the field of cost-of-capital relates to the different sub-disciplines of Finance and for which fields of application of Managerial Finance it is relevant. In particular, the role of cost-of-capital in internal capital allocation, performance measurement and value-based management is discussed. In Sect. 2.3, a theoretical framework for the determination of cost-of-capital in a company group context that is derived from traditional Finance theory is presented as a foundation for the subsequent section. In Sect. 2.4, previous research on the determination techniques for the cost-of-capital of business units and projects is discussed thoroughly. This includes a detailed discussion of the techniques as well as the theoretical and empirical methods adopted by other researchers.

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“…Recently, Ingram and Margetis (2010) presented a method to form groups of comparable companies with the help of cluster analysis.…”

Section: Discussion Of the Techniquementioning

confidence: 99%

Section: Cost-of-capital Of Business Units and Projectsmentioning

confidence: 98%

Background: Cost-of-Capital in the Finance Literature

Schlegel¹

2015

Contributions to Management Science

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“…Cluster analysis is a very commonly used approach in analysing research data collected in sociological, marketing or psychological research to group specific phenomena or objects, such as consumers, clients, and managers (e.g., Khan, Bakkappa, Metri, & Sahay, 2009;Saunders, 1980). Accounting, including management accounting (e.g., Ingram & Margetis, 2010;Nimtrakoon & Tayles, 2015) may also be subjected to grouping. In addition to cluster analysis, descriptive statistics (occurrence frequency of the phenomenon, mean standard deviation, variance) were used in the presentation of the findings.…”

Section: Methodsmentioning

confidence: 99%

Managers’ perception of the management accounting information system in transition countries

Dobroszek

Zarzycka

Almăşan

et al. 2019

Economic Research-Ekonomska Istraživanja

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The aim of this study is to investigate the perception of managers from transition countries, as regards the management accounting information system. The research was conducted between May 2015 and March 2016 among businesses operating in Poland and Romania. The data were processed by means of cluster analysis. The findings indicate that the financial information used in operational management is highly rated by managers. Of the three profiles of managers distinguished, those defined as supporters and neutrals dominate in both countries.

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“…On the stage of variable selection in the process of model building, cluster analysis is used [58]. Its basis is a selection of research sample among the mining enterprises listed on stock exchanges.…”

Section: Contributions To Mineralizationmentioning

confidence: 99%

Expected Return on Capital in Mining Industry

Michalak¹

2018

Contributions to Mineralization

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Capital is a necessary element of each economic activity. In the enterprises functioning in capital-consuming industries, such as mining industry, the problem of capital becomes more complex and is followed by a number of problems. Investors (both owners and creditors) expect the return on invested capital, taking into consideration the risk level connected with the activity that is to be financed by them. The problem raised in this work is related to the determination of the ways of calculation of the expected return on capital from the point of view of capital provider, with the inclusion of the specificity of mining industry. The universal calculation methods in use are difficult to be applied in the enterprises from mining industry because of the specific character of risk emerging in these enterprises, unique character, and high capital consumption. The author suggests modification of one of the most popular methods and presents her own, new solutions in this area, adjusted to the specificity of mining enterprises. The solutions presented allow a more realistic look on the issue of financing mining activity.

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A practical method to estimate the cost of equity capital for a firm using cluster analysis

Cited by 12 publications

References 13 publications

Background: Cost-of-Capital in the Finance Literature

Background: Cost-of-Capital in the Finance Literature

Managers’ perception of the management accounting information system in transition countries

Expected Return on Capital in Mining Industry

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