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Privatization and the Corporate Cost of Capital in New Zealand: An Application of Fama and French (1999)

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  • McGraw, Patricia A.

Abstract

Fama and French’s (1999) internal rate of return method is applied to Datastream data from 1993-2001 for 81 non-financial firms listed on the New Zealand Stock Exchange. The nominal return on value is 7.09%. The real return on value is 5.07%. The nominal return on cost is 11.59%. The real return on cost is 9.48%. The 10 former state-owned enterprises have nominal and real returns significantly higher than the 71other publicly-listed companies and their capital structures and market-to-book values differ significantly. Return on corporate investment has been profitable but real and nominal compound returns and simple returns have declined over time.

Suggested Citation

  • McGraw, Patricia A., 2005. "Privatization and the Corporate Cost of Capital in New Zealand: An Application of Fama and French (1999)," Review of Applied Economics, Lincoln University, Department of Financial and Business Systems, vol. 1(1), pages 1-25, June.
    • Handle: RePEc:ags:reapec:143482
    DOI: 10.22004/ag.econ.143482
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    References listed on IDEAS

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    1. Bernardo Bortolotti & Marcella Fantini & Domenico Siniscalco, 2001. "Privatisation Around the World: New Evidence from Panel Data," CESifo Working Paper Series 600, CESifo.
    2. William L. Megginson & Robert C. Nash & Jeffry Netter & Adam L. Schwartz, 2000. "The Long-Run Return to Investors in Share Issue Privatizations," Financial Management, Financial Management Association, vol. 29(1), Spring.
    3. Maria K. Boutchkova & William L. Megginson, 2000. "Privatization and the Rise of Global Capital Markets," Financial Management, Financial Management Association, vol. 29(4), Winter.
    4. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
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