Competitive advantage and the cost of equity in international shipping

J. Pointon, A. El-Masry

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This paper examines the relationship between dividend-based and earnings-based cost of equity capital estimates under temporary competitive advantage. A new insight is that the true cost of equity is shown to approach the geometric mean of the supernormal dividend-based and simple earnings-based estimates, as the mean period of competitive advantage approaches the supernormal payback period. We proceed to analyse the international shipping sector across 14 countries from 1998 to 2005. Although the mean cost of equity is around 10–11%, there is high variability and non-normality. The cost of equity measures under temporary competitive advantage provide estimates statistically independent of those based on stock market risk.
Original languageEnglish
Pages (from-to)1138-1145
Number of pages8
JournalJournal of the Operational Research Society
Volume58
Issue number9
DOIs
Publication statusPublished - 21 Dec 2007
Externally publishedYes

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