Assessing the Competitive Ability of companies listed on the Tehran stock exchange based on Cross Efficiency Model and its Relationship with Cost of Equity
DOI:
https://doi.org/10.22279/navus.2021.v11.p01-15.1592Keywords:
assessment of competitiveness, cross-efficiency, Data Envelopment Analysis (DEA), cost of equity, pharmaceutical companies.Abstract
This study aimed to evaluate the relationship between competitiveness score and cost of equity. To this end, efficiency scores of companies were measured based on competitiveness using a cross efficiency model in data envelopment analysis (DEA), and its relationship with the cost of equity was examined using a multivariate regression model for 19 pharmaceutical companies listed on the Tehran Stock Exchange during the years 2015 to 2019. The investigation of the subject was carried out in two stages. In the first stage, assessment of competitiveness and obtaining the competitiveness efficiency score of companies were addressed using the mathematical model presented in this study, which was a secondary goal in cross efficiency. Moreover, the cost of equity was calculated using the Gordon model. In the second stage, statistical techniques were exploited to evaluate the competitiveness efficiency score and the cost of equity. The results achieved from the research indicated that there is a significant positive correlation between the variables of companies' efficiency scores based on competitiveness and cost of equity. This means that cost of equity and dividends will also increase by increasing competitiveness, which causes an increase in the external financing of companies.
Downloads
References
Aggarwal, R. Kyaw, N. (2010). Capital Structure, dividend policy and multinationality: Theory versus empirical evidence. International Review of Financial Analysis, 19(2), 140-150.
Anderson, R.T., Hollingsworth.K. Inman, L. (2002). The Fixed Weighting Nature of a Cross-Evaluation Model. Journal of Productivity Analysis, 17(3), 249-255.
Barecly, M., Holderness, C. & Sheehan, D. (2006).Dividends and corporate shareholders. Working paper, University of Rochester.
Bazrkar, A., Iranzadeh, S. (2017),Choosing a strategic process in order to apply in Lean Six Sigma methodology for improving its performance using integrative approaches of BSC and DEA. Journal of Business and Retail Management Research, 11(4), 114-123.
Beiner, S.(2001).Theories and determinants of dividend policy. Journal of Corporate Finance, 10(1).29-40.
Black, F. (1972). Capital Market Equilibrium with Restricted Borrowing. Journal of Business, 45(3). 444–455.
Charnes, A., Cooper, W. W., Rhodes, E. (1987). Measuring the efficiency of decision-making units. European Journal of Operational Research, 1, 429–444.
Chaharmahali,A. A., Zahedi, J., & Mohammadi, R. (2019). The Role of Market Capitalization on the Relationship of ROA and ROE with Stock Prices in Tehran Stock Exchange. Asset Management and Financing, 7(4), 17-30.
Chen, L. H. (2013). Income smoothing, information uncertainty, stock returns, and cost of equity. Review of Pacific Basin Financial Markets and Policies, 16 (03), 135.
Choua, J, Ng, L, Sibilkov, V, & Qinghai, W. (2011). Product Market Competition and Corporate Governance. Review of Development Finance, 1, 114–130.
Davtalab Olyaie, M. (2019). A secondary goal in DEA cross efficiency evaluation: A “one home run is much better than two doubles” criterion. Journal of the Operational Research Society, 70(5), 807–816.
Ehrgott, M. (2005). Multicriteria Optimization. Berlin: Springer.
Fama, E., & French, A. (2013). A Five-Factor Asset Pricing Model. Journal of Financial Economics, 1-51.
Fama, E., & French, A. (2015) .Dissecting Anomalies with a Five-Factor Model. Fama-Miller Working Paper, 1-74.
Gaspar, J., & Massa, M. (2006). Idiosyncratic Volatility and Product Market Competition. Journal of Business, 79, 3125–3152.
Gupta, C. M. (2016). An Integrated Model for the Cost-Minimizing Funding of Corporate Activities over Time. Review of Economics & Finance, 6(4), 1-18.
Hitt, M. A. (1995). Strategic Management: Competitiveness and Globalization. St. Paul: West Publishing Company.
Jiang, F., Kim, K. A., Nofsinger, J. R., & Zhu, B. (2015). Product market competition and corporate investment: Evidence from China. Journal of Corporate Finance, 35, 196-210.
Karimi, M., & Karimi, B. (2017). Linear and conic secularizations for obtaining properly efficient solutions in multiobjective optimization. Mathematical Sciences, 11(4), 319-325.
Kohansal, M. R., Dadrasmoghaddam, A., Karmozdi, K. M., & Mohseni, A. (2013). Relationship between financial ratios and stock prices for food industry firms in stock exchange of Iran. World Applied Programming, 3(10), 512-521.
Leventis, S., & Weetman, P., (2011). Agency Costs and Product Market Competition: The Case of Audit Pricing in Greece. The British Accounting Ravie, 43, 112–119.
Liang, L., Wu, J., Cook, W. D., & Zhu, J. (2008). Alternative secondary goals in DEA cross efficiency evaluation. International Journal of Production Economics, 36, 1025–1030.
Linter, J. (1956). Distribution of incomes of corporations among dividends, retained earnings, and taxes. American Economic Review, 46, 97-133
Lintner, J. (1964). Security Prices, Risk and Maximal Gains from Diversification. Journal of Finance, 20(4). 587–615.
Liu, C., Lin, B., & Shu, E. (2017). Employee quality, monitoring environment and internal control. China Journal of Accounting Research, 10(1), 51-70.
Markowitz, M. (1959). Portfolio Selection: Efficient Diversification of Investments. London: John Wiley.
McGuane, L., & Zhou, J. (2016). Market Power and Dividend Policy: a Risk-Based Perspective. SSRN, 2008.
Moeini, M., Karimi, B., & Khorram, E. (2015). A Cross-Efficiency Approach for Evaluating Decision Making Units in Presence of Undesirable Outputs. In L. Thi, H. An, P. Dinh, Tao, Nguyen, Ngoc Thanh (Eds.). Modelling, Computation and Optimization in Information Systems and Management Sciences. Berlin: Springer.
Munteanu, L. (2011). Cost of equity, financial information disclosure, and IFRS adoption: A literature review. Internal Auditing & Risk Management, 6(4), 67-80.
Pepall, L., Richards, D., & Norman, G. (2008). Industrial Organization: Contemporary Theory and Empirical Applications. London: Wiley.
Porter, M. E. (1990). The competitive advantage of nations. Harvard Business Review, 68(2), 73–93.
Rozeff, M. (1992). Growth, Beta and Agency costs as determinants of dividend payout Ratio. The Journal of Financial, 5, 249-259.
Sarkar, J. (2013). Performance of a flat-plate solar thermal collector using supercritical carbon dioxide as heat transfer fluid. International Journal of Sustainable Energy, 32(6), 531-543.
Sexton, T. R., Silkman, R. H., Hogan, A. J. (1986). Data envelopment analysis: Critique and extensions. In: R.H Silkman (ed.) Measuring Efficiency: An Assessment of Data Envelopment Analysis, 3, 73–105.
Sharma, V. (2010). Stock Returns and Product Market Competition: beyond Industry Concentration. Review of Quantitative Finance and Accounting, 37, 283-299.
Sharpe, W. F. (1964). Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk. Journal of Finance, 19(3), 425–442.
Smith, D. J., Chen, J., & Anderson, H. (2008). The relationship between capital structure and product markets: evidence from New Zealand. Review of Quantitative Finance and Accounting, 38, 1–24.
Siggel E. (2000). Uganda’s Policy Reforms, Industry Competitiveness and Regional Integration: A Comparison with Kenya. African Economic Policy, Discussion Paper, 24.
Siggel, E., & Cockburn, J. (1995). International Competitiveness and its Sources: A Method of Development Policy Analysis. Discussion Paper (9517), Department of Economics, Concordia University.
Tobin, J. (1958). Liquidity Preference as a Behavior toward Risk. Review of Economic Studies, 25, 2, 65-86.
Towit, Y., & Mendelson, H. (2013). Asset pricing and the bid–ask spread. Journal of Financial Economics, 17,223-249.
Verdi, R. (2006). Information environment and the cost of equity capital. Working Paper, Massachusetts Institute of Technology.
Zhang, Y. (2005). Capital Structure and Competitive Behavior: The Effect of Equity Financing and Earnings Pressure. Academy of Management Journal, 151-156.
Zhou, Q., Keng, T. K. J., Faff, R., & Zhu, Y. (2016). Deviation From Target Capital Structure Cost of Equity and Speed of Adjustment. Journal of Corporate Finance, 39, 99-120.
Published
Issue
Section
License
O conteúdo da revista é de acesso público e gratuito, podendo ser compartilhado de acordo com os termos da Creative Commons Atribuição-Uso não-comercial-Vedada a criação de obras derivadas 4.0 Brasil. Você tem a liberdade de compartilhar — copiar, distribuir e transmitir a obra, sob as seguintes condições:
a) Atribuição — a atribuição deve ser feita quando alguém compartilhar um de seus artigos e deve sempre citar o nome da revista e o endereço do conteúdo compartilhado.
b) Uso não-comercial — você não pode usar esta obra para fins comerciais.
c) Vedada à criação de obras derivadas — você não pode alterar, transformar ou criar em cima desta obra.
Ficando claro que:
Renúncia — qualquer das condições acima pode ser renunciada se você obtiver permissão do titular dos direitos autorais. Domínio Público — onde a obra ou qualquer de seus elementos estiver em domínio público sob o direito aplicável, esta condição não é, de maneira alguma, afetada pela licença.
Outros Direitos — os seguintes direitos não são, de maneira alguma, afetados pela licença:
- Limitações e exceções aos direitos autorais ou quaisquer usos livres aplicáveis;
- os direitos morais do autor;
- direitos que outras pessoas podem ter sobre a obra ou sobre a utilização da obra, tais como direitos de imagem ou privacidade.
Aviso — para qualquer reutilização ou distribuição, você deve deixar claro a terceiros os termos da licença a que se encontra submetida esta obra.
A revista se reserva o direito de efetuar, nos originais, alterações de ordem normativa, ortográfica e gramatical, com vistas a manter o padrão culto da língua, respeitando, porém, o estilo dos autores.
Os trabalhos publicados passam a ser propriedade da revista Navus: Revista de Gestão e Tecnologia que deve ser consignada a fonte de publicação original. Os originais não serão devolvidos aos autores.
As opiniões emitidas pelos autores nos artigos são de sua exclusiva responsabilidade.
Esta obra está licenciada sob uma Creative Commons Atribuição-Uso não-comercial-Vedada a criação de obras derivadas 4.0 Brasil.
