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The aim of this article is to evaluate the impact on financial variables on the systematic risk of the listed companies in Tehran Stock Exchange. The evaluation of R&D costs of the listed companies in Tehran Stock Exchange is a difficult process, as there are still some problems in the accountancy calculations, particularly problems of facing costs.
Теги: degree of financial leverage degree of operating leverage systematic risk систематический риск эффект операционного рычага эффект финансового рычага
The evaluation of R&D costs of the listed companies in Tehran Stock Exchange is a difficult process, as there are still some problems in the accountancy calculations, particularly problems of facing costs. As for the interrelation between systemic risk and R&D costs, it should be mentioned that much work has been done for it. For instance, Hamada [1], Mandelker, Rhee [2] and Rubinshtein have made the following analyses:
• they have evaluated the impact of the inner risk of business, as well as the impact of financial and functional leverage on the systemic risk;
• have evaluated the correlative dependence of systemic risk and R&D frequency, and they have stated it according to the inner risk of business and financial and operational leverage.
Formula 1 can be quoted here according to the first point [3]:
β = β0 ∙ DOL ∙ DFL (1)
Thus the following formula is right (2)
β0 = β/(DOL ∙ DFL), (2)
where β0 is the inner business risk of common stock, DOL is the degree of operating leverage, DFL is the degree of financial leverage.
DOL and DFL can be calculated by using equations (3) and (4) [3]:
DOL = ΔEBIT/ΔNS, (3)
where EBIT is the earnings before interest and taxes.
DFL = ΔEAT/ΔEBIT, (4)
where EAT is the earnings after taxes.
Chang in 1989 [3] has suggested that the inner risk of business defines the condition of the sale.
There is a correlative connection between the systemic risk and R&D frequency. The latter also influences DFL and DOL. Therefore, the following hypotheses can be given:
• there is a correlation between R&D frequency and the inner risk of business;
• there is a correlation between R&D frequency and DOL;
• there is a correlation between R&D intensiveness and DFL.
For evaluating the correlation between R&D frequency and the systemic risk of the listed companies in Tehran Stock Exchange, the variables in three hypotheses have been calculated by logarithmic costs. Then the companies which had negative costs for the systemic risk, R&D frequency, the inner risk of business, as well as for financial and operational leverage have been taken away from the listed 30 companies. In addition, taking into account that about 8 panel series are needed to evaluate the correlative dependence of two variables, as a consequence, the year of 2011 has been taken out of the calculations because of not meeting the presented demands.
Taking as a basis the method of evaluating the correlation between R&D frequency and the systemic risk given by Zenew, Meng and other thinkers according to the financial variables of companies, they have been calculated for the 30 companies listed in Tehran Stock Exchange, which had the highest R&D costs in 2010–2015 through the following formula [6]:
corelation (ln β, ln R&D) = = (σln β0/σln β) ρ (ln β0, ln R&D) + (σln DOL/σln β) ρ (ln DOL, ln R&D) + (σln DFL/σln β) ρ (ln DFL, ln R&D). (5)
Formula (5) [6] can be divided into separate parts for making the formula easier.
• So, the following ratios σln β0/σln β, σln DOL/σln β and σln DFL/σln β [5] mean that the overall sum of standard deviation cost ratios of the inner risk of the company and the systemic risk, as well as DOL and the systemic risk, DFL and the systemic risk do not surpass the 5.7 (Fig.1–2);
• ρ (ln β0, ln R&D), ρ (ln DOL, ln R&D) and ρ (ln DFL, ln R&D) – it means that there is a correlation between the systematic risk and R&D frequency, DOL and R&D frequency, as well as between DFL and R&D frequency.
For example, in 2014 only 17 companies from the 30 listed ones met the demands of formula (5) [6]. This means that the correlation between the systemic risk and R&D frequency has been calculated according to the average cost of standard deviation of each variable, moreover, it has been also stated by Pearson’s coefficient that the existing correlation is weakly positive (Table 2).
Pearson’s coefficients were calculated in the listed 9 companies in Tehran Stock Exchange in 2015 according to ρ (ln β0, ln R&D), ρ (ln DOL, ln R&D) and ρ (ln DFL, ln R&D) made up 0.44, 2.21, 1.49. There is a weak positive relationship between the systemic risk and R&D frequency in the listed 9 companies which made up average 2.9. The latter was accounted in the product result of correlative costs of standard deviation coefficients (σLnβ0/σLnβ, σLnDOL/ σLnβ, σLnDFL/σLnβ) and business inner risk, R&D frequency (Table 2).
Pearson’s coefficients were calculated in the listed 17 companies in Tehran Stock Exchange in 2014 according to ρ (ln β0, ln R&D), ρ (ln DOL, ln R&D) and ρ (ln DFL, ln R&D), which accordingly made up 0.32, 0.06, –0.09. As a consequence there is a weak positive relationship between the systemic risk and R&D frequency in the listed 17 companies which made up average 2.9. The latter was accounted in the product result of correlative costs of standard deviation coefficients σln β0/σln β, σln DOL/σln β and σln DFL/σln β and business inner risk, R&D frequency, as well as DOL and R&D frequency, DFL and R&D frequency of the listed companies (Тable 2).
According to formula (5), in the result of calculation in 2013, only 12 companies from the listed 30 ones have been confirmed in Tehran Stock Exchange (Fig.3), according to the standard deviation average weigh cost, as well as it has been stated that there is a weak positive correlation between them, which is 0.29 (Table 2).
It must be noted that the correlation between the systemic risk and R&D frequency has been accounted by the same methodology, which was done in 2014. Thus, in 2013 the average weighed and logarithmic costs in the listed 12 companies in Tehran Stock Exchange according to the ratio between business inner risk and the systemic risk, the ratio between DOL and the systemic risk, as well as the ratio between DFL and systemic risk have made up accordingly 2.15, 1.44, 1.11. As for the correlation between the systemic risk and R&D frequency, it must be noted that according to Pearson’s coefficient there is no correlation between them or it is negligible, as it has made up –0.3 (Table 2).
Only 8 companies from the listed 30 companies have met the demands of formula (5) [3] and the correlation between the systemic risk and R&D frequency was accounted which has made up the average –1.8. It means that there is no correlation between the observed indexes, or it is negligible (Table 2).
The correlation between R&D frequency and the systemic risk were accounted only in 9 companies from the listed 30 ones in Tehran stock Exchange in 2010.
According to Pearson’s [7] coefficient, it has made up midst 3.3, which means that there is a mean positive correlation between the observed indexes (Table 2).
As a consequence, only in 2014 and in 2010 there was a weak positive average correlation, accordingly in 12 and 9 companies, for the other years it was negligible. The year of 2011 has been elicited from the calculations, as the observed indexes like business inner risk and the systemic risk, DFL and DOL, the costs of R&D frequency were negative and their dynamic series were less than 8.
So concluding the analysis results of this subquestion, it can be said, that the inner risk of business as well as DFL and DOL influence the systemic risk of the listed 30 companies in Tehran Stock Exchange. In the result of their calculation, it was found out that there was a positive correlation between the systemic risk and R&D frequency only in 2011 and in 2014. As a consequence, all the three hypotheses are confirmed. ■*
• they have evaluated the impact of the inner risk of business, as well as the impact of financial and functional leverage on the systemic risk;
• have evaluated the correlative dependence of systemic risk and R&D frequency, and they have stated it according to the inner risk of business and financial and operational leverage.
Formula 1 can be quoted here according to the first point [3]:
β = β0 ∙ DOL ∙ DFL (1)
Thus the following formula is right (2)
β0 = β/(DOL ∙ DFL), (2)
where β0 is the inner business risk of common stock, DOL is the degree of operating leverage, DFL is the degree of financial leverage.
DOL and DFL can be calculated by using equations (3) and (4) [3]:
DOL = ΔEBIT/ΔNS, (3)
where EBIT is the earnings before interest and taxes.
DFL = ΔEAT/ΔEBIT, (4)
where EAT is the earnings after taxes.
Chang in 1989 [3] has suggested that the inner risk of business defines the condition of the sale.
There is a correlative connection between the systemic risk and R&D frequency. The latter also influences DFL and DOL. Therefore, the following hypotheses can be given:
• there is a correlation between R&D frequency and the inner risk of business;
• there is a correlation between R&D frequency and DOL;
• there is a correlation between R&D intensiveness and DFL.
For evaluating the correlation between R&D frequency and the systemic risk of the listed companies in Tehran Stock Exchange, the variables in three hypotheses have been calculated by logarithmic costs. Then the companies which had negative costs for the systemic risk, R&D frequency, the inner risk of business, as well as for financial and operational leverage have been taken away from the listed 30 companies. In addition, taking into account that about 8 panel series are needed to evaluate the correlative dependence of two variables, as a consequence, the year of 2011 has been taken out of the calculations because of not meeting the presented demands.
Taking as a basis the method of evaluating the correlation between R&D frequency and the systemic risk given by Zenew, Meng and other thinkers according to the financial variables of companies, they have been calculated for the 30 companies listed in Tehran Stock Exchange, which had the highest R&D costs in 2010–2015 through the following formula [6]:
corelation (ln β, ln R&D) = = (σln β0/σln β) ρ (ln β0, ln R&D) + (σln DOL/σln β) ρ (ln DOL, ln R&D) + (σln DFL/σln β) ρ (ln DFL, ln R&D). (5)
Formula (5) [6] can be divided into separate parts for making the formula easier.
• So, the following ratios σln β0/σln β, σln DOL/σln β and σln DFL/σln β [5] mean that the overall sum of standard deviation cost ratios of the inner risk of the company and the systemic risk, as well as DOL and the systemic risk, DFL and the systemic risk do not surpass the 5.7 (Fig.1–2);
• ρ (ln β0, ln R&D), ρ (ln DOL, ln R&D) and ρ (ln DFL, ln R&D) – it means that there is a correlation between the systematic risk and R&D frequency, DOL and R&D frequency, as well as between DFL and R&D frequency.
For example, in 2014 only 17 companies from the 30 listed ones met the demands of formula (5) [6]. This means that the correlation between the systemic risk and R&D frequency has been calculated according to the average cost of standard deviation of each variable, moreover, it has been also stated by Pearson’s coefficient that the existing correlation is weakly positive (Table 2).
Pearson’s coefficients were calculated in the listed 9 companies in Tehran Stock Exchange in 2015 according to ρ (ln β0, ln R&D), ρ (ln DOL, ln R&D) and ρ (ln DFL, ln R&D) made up 0.44, 2.21, 1.49. There is a weak positive relationship between the systemic risk and R&D frequency in the listed 9 companies which made up average 2.9. The latter was accounted in the product result of correlative costs of standard deviation coefficients (σLnβ0/σLnβ, σLnDOL/ σLnβ, σLnDFL/σLnβ) and business inner risk, R&D frequency (Table 2).
Pearson’s coefficients were calculated in the listed 17 companies in Tehran Stock Exchange in 2014 according to ρ (ln β0, ln R&D), ρ (ln DOL, ln R&D) and ρ (ln DFL, ln R&D), which accordingly made up 0.32, 0.06, –0.09. As a consequence there is a weak positive relationship between the systemic risk and R&D frequency in the listed 17 companies which made up average 2.9. The latter was accounted in the product result of correlative costs of standard deviation coefficients σln β0/σln β, σln DOL/σln β and σln DFL/σln β and business inner risk, R&D frequency, as well as DOL and R&D frequency, DFL and R&D frequency of the listed companies (Тable 2).
According to formula (5), in the result of calculation in 2013, only 12 companies from the listed 30 ones have been confirmed in Tehran Stock Exchange (Fig.3), according to the standard deviation average weigh cost, as well as it has been stated that there is a weak positive correlation between them, which is 0.29 (Table 2).
It must be noted that the correlation between the systemic risk and R&D frequency has been accounted by the same methodology, which was done in 2014. Thus, in 2013 the average weighed and logarithmic costs in the listed 12 companies in Tehran Stock Exchange according to the ratio between business inner risk and the systemic risk, the ratio between DOL and the systemic risk, as well as the ratio between DFL and systemic risk have made up accordingly 2.15, 1.44, 1.11. As for the correlation between the systemic risk and R&D frequency, it must be noted that according to Pearson’s coefficient there is no correlation between them or it is negligible, as it has made up –0.3 (Table 2).
Only 8 companies from the listed 30 companies have met the demands of formula (5) [3] and the correlation between the systemic risk and R&D frequency was accounted which has made up the average –1.8. It means that there is no correlation between the observed indexes, or it is negligible (Table 2).
The correlation between R&D frequency and the systemic risk were accounted only in 9 companies from the listed 30 ones in Tehran stock Exchange in 2010.
According to Pearson’s [7] coefficient, it has made up midst 3.3, which means that there is a mean positive correlation between the observed indexes (Table 2).
As a consequence, only in 2014 and in 2010 there was a weak positive average correlation, accordingly in 12 and 9 companies, for the other years it was negligible. The year of 2011 has been elicited from the calculations, as the observed indexes like business inner risk and the systemic risk, DFL and DOL, the costs of R&D frequency were negative and their dynamic series were less than 8.
So concluding the analysis results of this subquestion, it can be said, that the inner risk of business as well as DFL and DOL influence the systemic risk of the listed 30 companies in Tehran Stock Exchange. In the result of their calculation, it was found out that there was a positive correlation between the systemic risk and R&D frequency only in 2011 and in 2014. As a consequence, all the three hypotheses are confirmed. ■*
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