Anderson School of Management Theses & Dissertations

Publication Date

5-27-1968

Abstract

By observation of the average cost of new debt capital, average market price per share of common equity, average earnings per share of common equity, and average price-earnings ratios, it is apparent that utilities are facing a deteriorating competitive situation in the capital market in relation to industrials. It was the purpose of this study to determine if these deteriorating characteristics were statistically significant or whether they were strictly attributable to chance. It was also to be determined if the movements in the utilities' average cost of new debt capital were significantly related in a statistical sense to the movements in utilities' average market price per share of common equity, average earnings per share of common equity, and average price-earnings ratios. The comparison of the utility characteristics and industrial characteristics was accomplished by analysis of their regression coefficients (slopes of the least squares fit) over the time period 1950-1966. Through the use of t-test analysis it was then determined if these regression coefficients were statistically different or if the difference was strictly due to chance. Multiple regression analysis was used in order to determine if the movements in average cost of new debt capital were significantly explained in a statistical sense by the movements in average market price per share of common equity, average earnings per share of common equity, and average price-earnings ratios. The t-test analysis was again used in order to determine if the multiple correlation coefficient was statistically different than zero. It was found that utilities were in a deteriorating competitive position with respect to average market price per share of common equity, average earnings per share of common equity, and average price-earnings ratios. The difference in regression coefficients of the average cost of new debt capital was found to be strictly attributable to chance. In addition, it was found that the changes in the utilities' average cost of new debt capital were not significantly explained by the changes in average market price per share of common equity, average earnings per share of common equity, and average price-earnings ratios.

Language

English

Document Type

Thesis

Degree Name

Master of Business Administration (MBA)

Level of Degree

Masters

Department Name

Anderson School of Management

First Committee Member

James E. Brown

Second Committee Member

Ralph Lemon Edgel

Third Committee Member

Everett G. Dillman

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