Unlisted Companies Research Articles

Finance and Small Manufacturing Firms: Do Market Listing and Size Entail Behavioural Differences?

It is possible to study companies according to their methods of gaining access to finance, and in particular the stock market. Two approaches are possible. The first looks at the organization of such access through the relationships built up by the company with suppliers of capital, enabling the financial territory of the company to be defined. The second approach, which does not exclude the first, is to compare companies according the degree to which they enjoy access to financial markets, which can be defined in terms of whether a company is listed on the stock market or not. Both approaches have been tested using data for recent years. The purpose of this paper is to examine firstly the differences in access to financial markets between large and small companies, and secondly the effects and constraints generated by the fact of being listed (comparison of listed and unlisted companies).

A Note on The Estimation of Betas for Single Industry Companies

In order to use the Capital Asset Pricing Model to estimate the cost of equity capital for an unquoted firm, it is often necessary to use the “pure-play” technique to obtain a surrogate beta with an appropriate asset structure for the unquoted firm.This paper identities betas tor single industry industrial companies listed on the Johannesburg Stock Exchange, it is shown that of the 121 such companies less than half have beta values that are significantly different from zero at the 95% level.This represents a serious inhibiting factor in the application of the Capital Asset Pricing Model to unlisted companies in South Africa.

Unlisted Businesses are Not Financial Clones of Listed Businesses

Benchmarks for judging financial performance are often found by using financial statement ratio analysis. Ratios of the publicly listed sector are not good surrogates for those of the unlisted sector. Observations of 209 financial statements from the unlisted sector (“small”) when compared to all publicly listed companies in New Zealand for the period 1984-1987 show larger ranges and variability for the unlisted sector. Unlisted companies’ financial ratios and their correlations cannot be considered the same as those of the listed companies. Caution is required before any use is made of listed companies’ performance ratios for judgments on unlisted companies.

The Effect of Unions on Firm Performance in Japanese Manufacturing

Using data on a sample of 979 union and nonunion Japanese manufacturing firms selected from the 1987 issue of the Yearbook of Japanese Unlisted Companies, the author examines the relationship between union status and firm performance in Japan. The findings suggest that Japanese unions in the sample substantially reduced both productivity and profitability, as well as regular wages net of bonuses and fringes. These three union effects were considerably smaller in small and medium-size firms than in large firms, perhaps because many of the small and medium-size firms were subcontractors that were pressed by the firms contracting them to cut costs and increase productivity.

The association between market-determined and accounting-determined risk measures in the South African context

A key problem in estimating the cost of capital for an unlisted company has been the determination of its beta coefficient. Market prices for such companies are not available, therefore the traditional regression methods for estimation are not possible. Thus, it is necessary for a proxy beta to be determined. In this article an attempt is made to develop such a proxy beta by using eight accounting variables. These accounting variables are shown to be significantly correlated to the market beta for individual companies. In addition, regression analyses are performed to develop an estimation model which will allow the individual company to obtain a proxy beta from its accounting variables. Satisfactory regression equations are developed for both the single share case and the portfolio case. The article is concluded with the presentation of a four-step procedure which will permit managers of unlisted companies to obtain a proxy for their beta and hence to estimate their overall cost of capital. In addition, it is shown that the procedure presented is consistent with the findings of modern portfolio theory.

Guidelines for moderately‐sized businesses

Everyone knows that large, listed companies like United Technologies, Iroquois, Dexter, Heublein, and Scovill have used acquisitions as one important part of their corporate growth strategies. But are acquisitions a practical growth alternative for moderate‐sized unlisted companies (or in some cases, divisions of larger companies)? All theory aside, do acquisitions work for companies as small as $10 million or $20 million in sales or $1 million or less in earnings?

Current Cost Accounting

In July 1973 the UK government announced that a special committee of enquiry was to be set up “to consider whether, and if so how, company accounts should allow for changes in costs and prices, having regard to established accounting conventions based on historic costs, the proposal for current general purchasing power accounting put forward by the Accounting Standards Steering Committee, and other possible accounting methods of allowing for price changes, and to make recommendations”. The twelve‐person committee under Francis Sandilands produced its 364‐page report (Cmnd.6225) in September 1975. The committee recommended that a system of current cost accounting should be adopted for listed companies, large unlisted companies, and nationalised industries for accounting periods beginning after 24 December 1977. It also recommended that a special steering group should be set up to oversee the introduction of current cost accounting. In November 1975 the government gave its qualified approval to the Sandilands recommendations, and agreed to set up a special steering group under the chairmanship of Mr. Douglas Morpeth. It is hoped that this group will produce a statement on this subject in the latter part of 1976.