John C Groth

Texas A&M University | TAMU · Department of Finance

Notes and spreadsheet to accompany Capital Investment Analysis for Managers See https://www.researchgate.net/publication/235702273_Capital_Investment_Analysis_for_Managers Happy to send on request. RG would not allow file format. These notes are in the form of a spreadsheet with amplifying comments that shows solution to case problem in the paper....

Examines the behavior of liquidity of the bank's stock surrounding the listing of the stock. Finds interesting behavior and discusses potential reasons for and implication of the behavior of returns.

Examines factors that inhibit the competitiveness of the Europe/EU, doing so 25 years ago. Offers insights and speculates on the future of Europe/EU. Develops a perspective valuable in assessing the current circumstances in the EU/Europe.

Limited literature provides concrete, theory-based methods for quantifying the effects of sharing capital. This paper describes the potential contribution of portfolio theory to quantify the effects and optimize the employment of capital (human, tangible, financial, and service employing capital) in a theoretical and quantitative manner in the cont...

Using a sample of 253 financially distressed Korean firms, this study examines the factors and motivations prompting asset sales by financially distressed firms. The authors examine with cross section analysis three hypotheses that explain the asset sales by financially distressed firms: (1) by bank pressure; (2) for bankruptcy avoidance; (3) as a...

This paper illustrates a technique to calculate the dollar economic value (DEV) of a customer relationship – and the value of an option to terminate the relationship. The paper is interdisciplinary, drawing on fundamentals of marketing and applied economic analysis. The sample customer project integrates the concepts of customer profitability, net...

It is a necessary disclaimer that you know that I am not a historian. What I share with you might suffer in terms of preciseness of order and even content. I may omit certain events that others would have included. Nevertheless, I offer thoughts that I hope will add to perspective. That is one of my objectives. In addition, it is my intent to provi...

Abstract: Characteristics of Human Capital: International Implications Human capital is the original and purest form of equity. About 40,000 – 60,000 generations of people have managed to survive, sometimes cope with change – and other times have been the cause of change. Besides providing for continuance of species, human capital has left many im...

This paper examines the critical importance of specific legal foundations common to economies that have developed and now enjoy high standards of living. It explains the economic cycle and identifies the importance of a legal system to all types of capital and to the operation of the cycle to satisfy human need fulfillment. The paper also addresses...

Individual decisions fall in the broad categories of instinctive, automatic, intuitive, deliberate, and impulsive. Decisions may be conscious, pre-conscious, or unconscious. These broad categorizations serve as background for the thrust of this paper. Decisions occur if certain forces exceed a threshold. This paper centers on issues related to acti...

Like many companies that have experienced enormous domestic success but then stumbled when attempting to enter international markets, Japan is finding that the international scene presents a significantly different set of challenges from those encountered and surmounted domestically. Those skills and attributes that brought Japan domestic success d...

Focuses on critical issues related to variable cost drivers essential in establishing criteria or parameters to consider in the modification and/or design of production facilities. Key concepts and relationships influence the choice of alternative technologies and methods in the design, upgrading, modification, or expansion of manufacturing and pro...

Examines how individual projects will affect the organization’s stated desire to “add value” by its operations, particularly how the market will judge each project on this basis. Considers rates of return, risk and cost of capital. Provides practical guidance for managers seeking to establish the cost of capital for a number of different types of p...

Reviews the previous research on the management of portfolio investment and compares the performance of a typical small investor’s portfolio of nine popular stocks (optimized portfolio) with a value-weighted portfolio (VW), using 1992-1997 US data. Explains how the portfolios were derived on a rolling basis from the previous 30 months’ data, using...

In this second paper in the series, the authors focus on special factors related to the perceived value of service and service quality. The article examines issues in the application of the concepts introduced in the first paper. A bank services scenario illustrates the concepts and guidelines for application useful to the marketing professional se...

Barriers and inhibitors block creativity and suppress or drive into hiding the creative talents of individuals and limit or destroy “creative willingness.” The paper reports on perceived blocks to creativity based on “face to face” input from over 1700 people, 67 groups, over a ten-year period.

The tax treatment of capital projects varies across Nordic/EU/European economies. The EU calls for continued movement to full economic integration. Different tax treatments influence decisions on if, when, and where to make investments. Disparity in tax treatment can have profound economic, social, and political consequences and affect the ability...

Focuses on the perceived value of a service by a customer, the perceived quality and value of a service, and the role of expectations, shortfalls, and bonuses in the valuation process. Considers on the implications of key relationships in the marketing and delivery of services. Characterizes customer perception of the perceived value of a service a...

Understanding capital structure and its practical implications is important to the professional manager regardless of functional area of expertise. The seminal work in the area of capital structure earned the researchers Nobel Prizes. In subsequent years, researchers have provided much additional and very important work on capital structure theory....

Focuses on perceived value, purchase decision thresholds, relationships in markets for assets. Incorporates economic and non-economic factors in the valuation process. Characterizes perceived values by an individual separate from market price. Casts valuation process as a function of utility and economic factors associated with an asset and non-eco...

Describes the conceptual meaning of the cost of capital (COC) and relates its use of COC in decisions that add value to a company. Illustrations provide the basis for an intuitive feel of the crucial role of COC in the pursuit of generating value. Explains the meaning of true economic value added (TEVA) and relates TEVA to COC and economic returns....

Briefly describes the nature and importance of capital investments and why managers of all functional areas should understand the basics of analysis. Reviews conceptual issues. Develops important perspectives for corporate leaders, managers and analysts. Provides practical guidelines for analysis. Furnishes a useful format for analysis easily adapt...

Provides the conceptual structure and practical framework for analysing the effects which changes in operating cycle variables will have on economic value. Focuses on important issues and techniques in analysing and managing raw materials, work in process, finished goods and accounts receivable. Addresses single and joint effects of changes in the...

Focuses on the operating cycle. Provides a conceptual and practical understanding of issues and relationships of importance to all managers, such as invested capital, flowing capital, return of and on capital, lost and idle capital, risk-return-value relationships, basic cost relationships and economic break-even. Explains and emphasizes how the op...

This paper investigates the association between listing and liquidity over the January 1991-December 1994 period for a large number of bank stocks. An empirical model is developed in which liquidity (using a measure that reflects the volume-price effects of demand and supply in market price) is a function of listing and certain other (ceteris parib...

This paper examines and updates an earlier study of the liquidity of an extensive array of common stocks traded on NYSE/ASE/NML-NASDAQ. It reports apparent variances in liquidity due to trading location and other variables. The paper suggests causes for these differences.

Focuses on understanding accounting and economic concepts, relationships and factors important as a basis for economic decisions that create value. Provides the background essential for understanding the future papers in the series. Offers a review and develops perspectives useful to those with or without knowledge of accounting. Distinguishes betw...

Focuses on sources of capital to an organization, investment and flows of capital within an organization, interaction with markets, the generation of economic returns, and the potential for the creation of value. Illustrates how the creation of value provides benefits to employees, shareholders, and society. Provides numerical illustration of the d...

Economic models enjoy growing use and importance. An environment characterized by rapid change and the interplay of a host of variables prompts increased use of and reliance on models. For example, one might want to predict the effect of a change in interest rates on housing starts. On the other hand, a company might desire to predict demand levels...

Addresses the conceptual consequences of rational behaviour in the context of potential outcomes from environmental risk. Identifies the main scenarios faced by a borrower and the behaviour one might expect given the circumstances. Focuses on the implications of borrower behaviour.

The exclusive value principle is one important factor determining the value of the service to the customer. High margins often result from the customer's perceptions of “exclusive value”. Success depends on understanding and making decisions within the context of the customer's psychic domain. Provides a brief review of background information and t...

The first of a two-article series addressing important factors in the pricing of services. Success at garnering a high price and margin on a service hinges on important variables. Mistakes in the delivery and pricing of services can have far-reaching “residual damage” effects quite different from those associated with the delivery of a “tangible” p...

New products that mesh with their external environment have a better chance of succeeding than those that do not. Companies that assess the external environment for potential new products effectively are more likely to market commercial winners than firms performing this activity ineffectively. Unfortunately, R&D programs often fail to recognize th...

Focuses on the importance within an organization of a philosophy for quality management. A clearly defined vision for the organization serves as a basis for identifying and selecting goals. Identifiable, attainable, and realistic goals are essential in leading, motivating and focusing human talents to move efficiently towards goals. There should ex...

Human labour will play a critical role in the future of Europe. Discusses ways to segregate capital into “Mind Human Capital” and “Physical Human Capital”. Argues that important differences between mind and physical human capital have profound implications for the future of Europe. Very significant trends in and related to human and physical capita...

Suggests scenarios for future images of what one commonly calls the European Union (EU). Many architects have laid plans for the future of Europe. Numerous forces have exerted and continue to exert their influences on Europe and its future. The net effect of these forces will precipitate the future for unification efforts and Europe. Asserts that t...

Codifies a unique marketing and valuation principle: the exclusive value principle (EVP). This principle relates value creation to “psychic space”. Psychic needs can create enormous margins and other benefits. One can influence price/demand as well a create, stimulate, or help define a need for a customer. Attractive margins result from psychic nee...

Focuses on the impact of environmental risk on lenders' behaviour. Begins by sketching background information then focuses on risk-return relationships and offers scenarios faced by lenders. Addresses rational creditor behaviour and the implications and consequences this behaviour has on borrowers and society.

The value of a company is a function of many variables. Costs are of special importance since managers can influence costs. Success at cost management has a phenomenal effect on value because of the relationships between costs, business risk, financial risk, and valuation. These relationships are non-linear. Consequently, success in cost management...

Focuses on what it will take for Western Europe to compete in the coming decades. Attention is given to the nature of competition in the markets and the likely trends and developments. Addresses key issues such as changes in standards of living, accumulating adverse social forces, economic forces and political risk. Predicts the current trend in Eu...

A vast array of factors can influence the purchase decision. Focuses on a specific subset of influential factors we term inhibitors. Recognizing and disarming inhibitors by removing, neutralizing or using them to one's advantage is crucial in terms of garnering sales. In addition, it can lead to added customer satisfaction. An effective marketing s...

Proposes the concept of “An exclusive Value Principle” as an explanation for the attainment of brandexclusivity. Argues that positioning a brand carefully with prestige pricing approach reinforces a positive, even exclusive, brand image in the mind of the customer. Presents relationships between an exclusive value, market price, margin, risk, and f...

Technology offers great opportunities to firms. Successfully bringing the benefits of technology to market and realizing favourable returns requires a careful balance and management of a host of factors. The critical test of such efforts occur where and when technology “meets the market”, resources and great efforts will yield returns only if one m...

Gives a brief background to risk evaluation methods and measures. Offers a simple definition of risk which may be useful to the managers. Examines risk issues relative to the statement of income, which allows a review of factors contributing to risk. Categorizes the origins of risk. Finally, provides a practical analysis and scoring system to help...

Technology offers great opportunities to firms. Successfully bringing the benefits of technology to market and realizing favourable returns requires a careful balance and management of a host of factors. The critical test of such efforts occurs where and when technology “meets the market”, resources and great efforts will only yield returns if one...

Highlights the operating cycle, its importance, and reviews basic relationships related to the cycle. In particular, it focuses on capital “flow through”, invested capital, capital at risk, and economic returns generated relative to capital employed. Reveals an amplification effect that results from improvements in the management of the cycle, that...

Stock pickers should focus attention on a subset of equity securities. The search for positive alphas should also select from those securities having the lowest correlation with market wide behavior, those securities for which common economic models do not "explain" a high proportion of observed returns.

Adoption of mental horizons of a global nature have prompted a variety of interests and developments. The trend will continue, especially in the areas of economics and business. This development has been accompanied by the globalisation and increased interest in international equity and credit investments and the development of currency, money, cap...

The prescription for 1992 for the European Community calls for the completion of the Internal Market and the absence of many of the fiscal and physical barriers to the movement of goods, capital, and labour within the community. However, realistically it is likely that residual fiscal and other barriers will remain into the next century. Both the e...

This issue of Managerial Finance focuses on factors related to the critical long term decisions for a firm. What it should do, and what capital investments are necessary to attain its goals. The right goals, the appropriate capital resources, and effective management will lead to success. Capital investments are for the tomorrows. That characterist...

Examines and explains the importance of effective communications in the valuation process. Effective corporate communications reduces risk perceived by investors. A reduction in perceived risk decreases the expected required rate of return demanded by investors. That reduction results in a favorable non-linear increase in value. In contrast, the fa...

Examines the effect of political and regulatory uncertainty on utilities and their cost of capital. Asserts that uncertainty in public policy always results in greater perceived risk for investors that precipitates a higher cost of capital. Suggests practical steps to take to minimize regulatory uncertainty.

Previous studies of over-the-counter (OTC) asked-bid spread behavior treat the sample stocks as a homogeneous group. Actually, there are several segments of the OTC market, ranging from the recently created National Market System to the pink sheets. We find that although previously proposed independent variables (risk, transaction rate, number of d...

The liquidity of securities-the relationship between volume of trading and changes in market price-has won increasing recognition as an element of investment strategy in recent years. Relatively high liquidity is deemed to be a desirable characteristic of a stock, especially for the institutional investor, who typically trades in large volume. Thus...

Two measures are used to estimate the liquidity of stocks that switch their places of trading (from OTC to NYSE, from OTC to AMEX, and from AMEX to NYSE). Using an event-type methodology, results are obtained that indicate a decline in liquidity for stocks leaving the OTC market. Stocks switching from the AMEX to the NYSE experience an initial incr...

Listing bank stocks seems to result in a decrease in liquidity for the stock.

Information and perceived uncertainty by investors has a significant impact on share value. Focuses on the importance of efficacy of disclosure, content, interpretation, various of information access, information flow and a host of related issues. These and other factors are of great import to the manager intent on increasing share value.

The estimation of a utility's required rate of return should, in fairness to shareholders and ratepayers, encompass the best available information. Quite often, however, average or summary data are conveniently analyzed by regulators who fail to perceive adequately the ensuing distortion of results. The authors of this article illustrate the impact...

The purpose of this article is to show the differential impact of the Windfall Profit Tax (WPT) on the cash flows of independent oil companies as compared to integrated companies. The presence of the differential impact coupled with the compounding effect leads to some interesting implications concerning th future growth of firms subject to the WPT...

A study of one brokerage house's recommendations to its individual customers during the 1960s suggests that they were genuinely valuable, even after allowing for transactions costs and risk. On the other hand, the recommendations were useful in selection, rather than in market timing: The ratio of buys to sells varied little over the period studied...

Availability of information to investors is not equally efficient for all securities. Differences in information environments affect the efficiency of information transmitted across stocks. One factor influencing information flow is the size of the firm as measured by market value. The findings indicate the largest firms had a markedly different pa...

Reviews disclosure requirements of SEC for oil and gas reporting. Proposes a disclosure framework that minimizes the chance of misleading information. Journal of Accountancy, September 1979 pp. 82-91

Examines and proposes a method to analysis and present in financial reporting information on reserves.

Explores some of the issues raised by critics of the U.S. bond-rating system and compares the institutionalization of bond ratings in the United States with the different role played by bond ratings in Canada. Stresses the importance of users of bond ratings to remain sensitive to their intended uses.

Examines risk descriptors that often accompany recommendations from security analysts. Compares these descriptors with estimates of the betas of the securities. Analysis suggests security analyst do give meaningful signals of the relative risk of equity securities.

Addresses basic elements of crisis planning, foundations for contingency planning, pre-crisis planning and training. Identifies key elements that define a crisis. Identifies specific factors of import in crisis planning and coping with a crisis. Gives specific guidelines and examples useful to the CEO in leading and training his/her executives and...

Recommendations provided by brokerage houses are often classified as to investment term (near,…) and objective (growth,…). An extensive set of recommendations made during the years 1964-1970 was examined. Issues addressed included availability of descriptors and stocks categorized by descriptors: differences in risk; the presence and pattern of ris...