Use this URL to cite or link to this record in EThOS: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.617094
Title: Stock market valuation of company performance and growth potential : a study of value creation and investment
Author: Al-Ja'fari, Mohammed Lutfi
Awarding Body: University of Manchester
Current Institution: University of Manchester
Date of Award: 1997
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Abstract:
This thesis provides an explanation of the market valuation of company performance and growth potential, and examines the determinants of corporate investment. It suggests a new approach that explains the market value that companies create for shareholders above the opportunity cost of capital by their performance relative to factor cost and the ability to exploit future investment potential. The empirical examination of the suggested approach provides a better explanation of value and return than traditional accounting-based models. The association, however, reveals significant inter- temporal, cross industry and cross sectional variations. As this instability impedes the ex ante predictive power of any association, potential sources of the variations are suggested and examined. The results show that temporal variations are related to macro-state variables, namely: inflation, interest rate, changes in risk premium. and the business cycle stage. Industrial variations are related to competition in the product market and growth potential. The identification of variation sources enables the investors to hedge separately against sources of temporal variations, and enhances the diversification considerations in portfolio selection. The research design along with the empirical evidence, based on UK data, emphasises the importance of company growth on its value, showing that company exploitation of investment potential is at least as important as its performance in value creation. Accordingly, individual-company investment-expenditure determinants are empirically examined. The analysis concludes that investment expenditure is affected more by product market conditions than by variations in the user's cost of capital and, moreover, investment spending for UK companies is generally robust in respect of capital market conditions and is unlikely to be affected by financial constraints.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID: uk.bl.ethos.617094  DOI: Not available
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