A Critical Long View of Capital Markets and Institutions: Realized Returns on Corporate Assets, 1950-2003
It is often taken for granted that: 1) capital markets and institutions allocate funds to firms with high returns; 2) the net gains to the economy from investments by corporations have improved in the last 30-50 years due to technological innovations; and 3) the discipline role of markets and institutions ensures that corporate assets funded with external funds earn higher returns. However, corporate real assets are long lived, and realized returns have to be tracked over a long period to verify these assertions. In this study, we perform large-scale calculations of the realized returns on assets to all firms available in the Compustat database for periods of 10, 20, 30, 40, and 50 years. Our methodology relies only on realized, not expected, cash flows between the firms and all their fund providers. We found several new and surprising results. Realized returns on corporate assets over long periods are, on the whole, lower than expected by the fund providers. They also suffer a long-term decline, and have been below the yields of 10- year Treasury Bonds since 1973. Additionally, firms that received more external financing (from capital markets and institutions) report even lower realized long-term returns. A wealth transfer from an increasingly important class of non-interest bearing liabilities augments the realized returns on equity. These unexpected results may stimulate a fresh debate on the role and long-term performance of capital markets and institutions.
James S. Ang Gregory L. Nagel Jun Yang
BankAmerica Eminent Scholar Department of Finance Florida State University Tallahassee, Florida 3230 Department of Finance and Economics Mississippi State University Starkville, Mississippi 39762 Department of Finance Indiana University Bloomington, Indiana 47405
国际会议
成都
英文
1-44
2007-07-09（万方平台首次上网日期，不代表论文的发表时间）