Analysing company-specific components of business risk in selected manufacturing firms in Indian corporate sector

Abstract

The present paper attempts to analyse the company-specific components of business risk, such as liquidity risk, cost structure risk and capital productivity risk of the selected Indian manufacturing sector during the period 1994-1995 to 2013-2014. The sample size of the study consists of one hundred companies which have been selected by taking the top five companies from each of the 20 selected industries. The business risk and its company specific components associated with the selected companies have been measured by using Gini's coefficient of concentration. Principal component analysis has been applied in designing the 'business risk index' (BRI) by taking into account the three company-specific components of business risk. Simple regression model has been adopted to investigate the effect of BRI on the return measured in terms of return on capital employed of the selected industries.