Publication detail

Corporate Life Cycle Identification: A Model Based on Relationship Between Return on Equity and Cost of Equity

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"
}