For publicly traded firms, calculating the cost of capital is predicated typically on information from the financial markets. Small businesses do not have the necessary…
Abstract
Purpose
For publicly traded firms, calculating the cost of capital is predicated typically on information from the financial markets. Small businesses do not have the necessary market‐based information. As an alternative to traditional proxy approaches, this paper presents a multi‐criteria model to determine an appropriate equity risk premium, and thereby, a cost of capital.
Design/methodology/approach
The study applies a multi‐criteria model – an analytical hierarchy process (AHP) – to determine the cost of capital for small businesses. It is a useful tool for the complex world in which small businesses function. Arbitrary and capricious ways of allocating resources is a luxury that small businesses can ill afford. The application of the model to a small business in South Africa is shown in this study.
Findings
The use of the AHP model is clearly a method to determine the equity risk premium and the cost of capital for small businesses.
Research limitations/implications
The model requires small business managers to identify all information sources for the required input data. This prepares the managers in advance for their information need. Thereafter, management is required to offer subjective thoughts on qualitative oriented criteria. This is attractive particularly to small business management since AHP pairwise comparison procedure allows managers to provide relative rather than absolute preference assessment one at a time on those qualitative factors. The inconsistency checking mechanisms within the AHP model allows management to identify inconsistencies at early stages of the solution process.
Originality/value
The paper offers practical help to lenders and small businesses wishing to invest in new capital projects.
Details
Keywords
For publicly traded firms, calculating the cost of capital is predicated typically on information from the financial markets. Small businesses do not have the necessary…
Abstract
Purpose
For publicly traded firms, calculating the cost of capital is predicated typically on information from the financial markets. Small businesses do not have the necessary market‐based information. As an alternative to traditional proxy approaches, this paper argues for a multi‐criteria model to determine an appropriate equity risk premium, and thereby, a cost of capital.
Design/methodology/approach
The study proposes a multi‐criteria model – an analytical hierarchy process (AHP) – to determine the cost of capital for small businesses.
Findings
Since the three proxy methods are shown to have numerous shortcomings, the use of the AHP model is clearly a method to determine the equity risk premium and the cost of capital for small businesses.
Research limitations/implications
The model requires small business managers to identify all information sources for the required input data.
Originality/value
The article offers practical help to lenders and small businesses wishing to invest in new capital projects.
Details
Keywords
Ralph Palliam and Robert Ankli
The pursuit of the culture of work as dignity is rarely a focus of scholarly writings. One dominant, widely shared and accepted cultural value of work ethic is the belief that it…
Abstract
Purpose
The pursuit of the culture of work as dignity is rarely a focus of scholarly writings. One dominant, widely shared and accepted cultural value of work ethic is the belief that it is work that accords dignity to a human being. While seemingly neglected in traditional management research, the concepts of dignity and well-being have experienced renewed attention from the humanities and social sciences. The ability to utilize this sense of dignity becomes a critical role of human resources in advancing self-worth and self-respect. The relationships between worker and management are considered within the culture of work as dignity.
Design/methodology/approach
This is a conceptual paper. A theoretical foundation of work as dignity is developed. It is uses Hofstede’s analysis of work-related cultural values in different countries. Work is identified as dignity that is equated to a universal property like the doctrine of modern democracy that is enjoyed by other societies.
Findings
If work accords dignity to humans, the ability to establish a sense of employee self-worth and self-respect and to enjoy the respect of others becomes critical objectives of management. This notion results in moving high-performance workplaces to high quality workplaces resulting in managerial conduct that is fair, equitable, reasonable and just. This paper is a call to rethink management theory from a humanistic perspective and highlights the role and protection of human dignity as a cornerstone in management theory. The concept of dignity elevates human responsibilities to the degree that they support the promotion of well-being.
Research limitations/implications
This is a conceptual paper. A rigorous empirical study needs to be conducted to substantiate the theoretical foundation.
Practical implications
Guidance is offered to managerial responsibility in promoting work as dignity, support for work as dignity, maintaining the dominant culture of work as dignity and identifying high-performance versus high-quality workplace.
Social implications
Dignity is a virtue. Cultural differences play a less meaningful role and individuals become more alike than unalike. Together with the dictates of modernizing technology, there is a measure of uniformity to how everyone approaches the world.
Originality/value
This study adds value in a somewhat different vein by presenting dignity as a central purpose of human life. This paper is a call to rethink management theory from a humanistic perspective and highlights the role and protection of human. The ability to establish a sense of employee self-worth and self-respect and to enjoy the respect of others becomes critical objectives of management. Moving high-performance workplaces to high-quality workplaces results in management conduct that is fair, equitable, reasonable and just. Human responsibilities need to be elevated to a degree that they support the promotion of well-being.
Details
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The purpose of this paper is to test assertions that economic value added (EVA) is more highly associated with stock returns and firm values than accrual earnings, and evaluates…
Abstract
Purpose
The purpose of this paper is to test assertions that economic value added (EVA) is more highly associated with stock returns and firm values than accrual earnings, and evaluates which components of EVA, contribute to these associations.
Design/methodology/approach
Thirty three non‐EVA users and 75 EVA users were selected at random. Variables used in this study were revenues, profits, assets, stockholders’ equity, market value, earnings per share, total return to investors, and percentage cost reduction over time. Data were collected on several metrics.
Findings
The study suggest that the common and widely accepted metrics used by analysts and calculated for EVA users are not necessarily superior to that of non‐EVA users. The evidence support that EVA is somewhat invalid, unreliable, and questionable.
Research limitations/implications
The first limitation deals with the measurement of capital invested in assets. The second limitation was the use of an accounting definition of the return on equity. The operating income was not cleansed of any expenses which are really capital expenses (in the sense that they create future value). The operating income was adjusted if any cosmetic effects were identified. The third limitation is the determination of cost of capital (estimate). Discounted cash flow valuation assumes that cost of capital is calculated using market values of debt and equity.
Practical implications
This study raises serious doubts about the capacity of EVA to deliver superior metrics. EVA users may be placing themselves at unnecessary risks and costs. Study shows that EVA is not a satisfactory descriptor of the real world and, therefore, it should be used with caution by management consultants, practitioners, and investors.
Originality/value
The movement in stock prices reflects something other than EVA.
Details
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Robert E. Ankli and Ralph Palliam
This paper recognizes self determination theory (SDT) as a model to successfully motivate an organization's workforce and recommends SDT as a more encompassing theory of…
Abstract
Purpose
This paper recognizes self determination theory (SDT) as a model to successfully motivate an organization's workforce and recommends SDT as a more encompassing theory of motivation. Consequently, motivation assumes a different dimension and it therefore becomes necessary to consider issues associated with autonomous motivation, controlled motivation, and motivation as a predictor of performance. This paper aims to address this issue.
Design/methodology/approach
The paper initially identifies the underlying assumptions of motivation that include: people having the capacity for responsible actions, a natural aspiration to learning and understanding things, and the desire to do good at work and play. The paper then proceeds to addresses several basic issues associated with SDT, namely, cognitive, affective and psycho‐motor development. Finally, it considers perception of the self, one's psychological and emotional needs, life goals and aspirations, individual dynamism, culture and the impact of social environments as key issues that determine one's ability to self‐actualize.
Findings
The study shows SDT's relevance to discussions in organizational behavior. The findings suggest that extrinsic motivation can be deleterious to intrinsic motivation. Work‐related happiness is acquired when individuals use their personality as a motivation determinant to fulfill a mission that is meaningful to themselves too. Individuals are most resourceful and innovative when they feel motivated largely as a result of their interest, their inner satisfaction, and challenges of the work itself and not by external pressures or incentives.
Practical implications
In this regard it is recommended that human resources professionals and/or managers need to consider issues associated with autonomous motivation, controlled motivation, and motivation as a predictor of performance. Different attitudinal relationships towards work‐play necessitate distinct types of motivation. Should work and play become homogeneous, the defining role of human resources management in relation to motivation needs revisiting in particular SDT
Originality/value
This paper adds to the academic literature on motivation in a somewhat different vein by presenting autonomy, competence, and relatedness in SDT as vitally essential for psychological growth, optimal functioning, and well‐being in any fields of endeavor. The study identifies extrinsic rewards as undermining intrinsic motivation in most circumstances.
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Ralph Palliam and Zeinab Karake Shalhoub
This research empirically tests the rationale of corporate downsizing of employees as a cost reduction strategy on the long‐run profitability of a corporation. The sample for this…
Abstract
This research empirically tests the rationale of corporate downsizing of employees as a cost reduction strategy on the long‐run profitability of a corporation. The sample for this study consisted of 185 large publicly‐held US‐based corporations which announced their intentions to downsize during the period 1990‐1992. Over the subsequent ten‐year period (1992‐2001) their returns on investment were obtained and the empirical relationship between downsizing and long‐run profitability was determined. Whether organizations that undergo this type of change appear to be better off than they were before they implemented the process was the focus of this study. The study ascertained that downsizing does not appear to be in the best long‐term interest of the corporation, its employees, or its shareholders, and that the massive job cuts did not lead to strong sustained gains in the price of the stock. Many organizational benefits fail to develop as expected and the benefits are elusive. The findings of this study suggest downsizing does not engender a long‐run productivity gain and it fails as a method to boost shareholder value.