Hostname: page-component-77c89778f8-5wvtr Total loading time: 0 Render date: 2024-07-23T18:13:37.667Z Has data issue: false hasContentIssue false
  • English
  • Français

Equivalent Risk Classes: A Multidimensional Examination

Published online by Cambridge University Press:  06 April 2009

John D. Martin ,
David F. Scott Jr  and
Robert F. Vandell
Get access Rights & Permissions [Opens in a new window]

Extract

It Is commonplace within the confines of finance literature to explain variations in the firm's residual income stream via the dichotomy of business risk and financial risk. On an ex-post basis the business risk of the enterprise is a direct result of the firm's investment decision and is, thereby, embodied in its asset structure. It follows that the company's cost structure, product demand characteristics, intra-industry competitive position, and managerial talent all affect its business risk posture.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 14 , Issue 1 , March 1979 , pp. 101 - 118
Copyright
Copyright © School of Business Administration, University of Washington 1979

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

[1]Barges, Alexander. The Effect of Capital Structure on the Cost of Capital. Englewood Cliffs: Prentice-Hall, Inc. (1963).Google Scholar
[2]Brigham, Eugene F., and Gordon, Myron J.. “Leverage, Dividend Policy, and the Cost of Capital.” Journal of Finance, Vol. 23 (03 1968), pp. 85–103.CrossRefGoogle Scholar
[3]Brittain, John A.Corporate Dividend Policy. Washington, D.C.: The Brookings Institute (1966).Google Scholar
[4]Clark, John J.; Clark, Margaret T.; and Elgers, Pieter T.. Financial Manage ment: A Capital Approach. Boston: Holbrook Press, Inc. (1976).Google Scholar
[5]Cohen, Jerome B.; Zinbarg, Edward D.; and Zeikel, Arthur. Investment Analysis and Portfolio Management. Rev. Ed. Homewood, 111: Richard D. Irwin, Inc. (1973).Google Scholar
[6]Elton, Edwin J., and Gruber, Martin J.. “Homogeneous Groups and the Testing of Economic Hypothesis.” Journal of Financial and Quantitative Analysis, Vol. 4 (01 1970), pp. 581–602.CrossRefGoogle Scholar
[7]“Improved Forecastng Through the Design of Homogeneous Groups.” The Journal of Business, Vol. 44 (10 1971), pp. 432–450.CrossRefGoogle Scholar
[8]Gonedes, Nicholas J. “A Test of the Equivalent-Risk Class Hypothesis.” Journal of Finacial and Quantitative Analysis, Vol. 4 (06 1969), pp. 159–177.CrossRefGoogle Scholar
[9]Gupta, Manak C., and Huefner, Ronald J.. “A Cluster Analysis Study of Financial Ratios and Industry Characteristics.” Journal of Accounting Research, Vol. 11 (Spring 1972), pp. 77–95.CrossRefGoogle Scholar
[10]Hamada, Robert S. “Portfolio Analysis, Market Equilibrium and Corporation Finance.” Journal of Finance, Vol. 24 (03 1969), pp. 13–30.CrossRefGoogle Scholar
[11]Jensen, Robert E. “A Cluster Analysis Study of Financial Performance of Selected Business Firms.” The Accounting Review, Vol. 46 (01 1971), pp. 36–56.Google Scholar
[12]Kendall, M. G. “A Course in Multivariate Analysis.” Seminar in Multivariate Analysis Sponsored by the Institute for Advanced Technology, Washington, D.C. (Spring 1975).Google Scholar
[13]Modigliana, Franco, and Miller, Merton H.. “The Cost of Capital, Corporation Finance, and the Theory of Investment.” The American Economic Review, Vol. 48 (06 1958), pp. 261–297. Reprinted in Stephen H. Archer and Charles A. D'Ambrosio. The Theory of Business Finance: A Book of Readings, 2nd ed. New York: Macmillan Publishing Co., Inc. (1976), pp. 453–488. Page references are to this latter source.Google Scholar
[14]Nemmers, Erwin Esser, and Grunewald, Alan E.. Basic Managerial Finance, 2nd ed.St. Paul: West Publishing Company (1975).Google Scholar
[15]Rao, Krishna N. “Equivalent-Risk Class Hypothesis: An Empirical Study.” Journal of Financial and Quantitative Analysis, Vol. 7 (06 1972), pp. 1763–1771.CrossRefGoogle Scholar
[16]Robichek, Alexander A., and Myers, Stewart C.. Optimal Financing Decisions. Englewood Cliffs: Prentice-Hall, Inc. (1965).Google Scholar
[17]Sauvain, Harry C.Investment Management, 4th ed.Englewood Cliffs: Prentice-Hall, Inc. (1973).Google Scholar
[18]Siegel, Sidney. Nonparametric Statistics for the Behavioral Sciences. New York: McGraw-Hill Book Company, Inc. (1956).Google Scholar
[19]Soldofsky, Robert M., and Olive, Garret D.. Financial Management. Cincinnati, Ohio: Southwestern Publishing Company (1974).Google Scholar
[20]Solomon, Ezra. The Theory of Financial Management. New York. Columbia University Press (1963).Google Scholar
[21]Van Horne, James C.Financial Management and Policy, 3rd ed.Englewood Cliffs: Prentice-Hall, Inc. (1974)Google Scholar
[22]Ward, Joe H. Jr, “Hierarchial Grouping to Optimize an Objective Function.” American Statistical Association Journal (03 1963), pp. 236–244.CrossRefGoogle Scholar
[23]Weston, J. Fred. “A Test of Cost of Capital Propositions.” The Southern Economic Journal, Vol. 30 (10 1963), pp. 105–112.CrossRefGoogle Scholar
[24]Wippern, Ronald F. “A Note on the Equivalent Risk Class Assumption.” The Engineering Economist, Vol. 11 (Spring 1966), pp. 13–22. Reprinted in J. Fred Weston and Donald H. Woods. Theory of Business Finance: Advanced Readings. Belmont, Calif.: Wadsworth Publishing Co., Inc. (1967), pp. 277–283. Page references are to this latter source.CrossRefGoogle Scholar