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Ruixue Du
Thesis submitted to the Faculty of the Virginia Polytechnic Institute and State
University partial fulfillment of the requirements for the degree of Master of
Science In Hospitality and Tourism Management
5/6/2008
Blacksburg, Virginia
Key Words: Share Price, Operating Cash Flow, Multiple Valuation, Earnings, Efficient
Market Hypothesis
THE RELATIONSHIP BETWEEN SHARE PRICE AND
OPERATING CASH FLOW
UNDER THE CASUAL THEME RESTAURANT
SETTING
Ruixue Du
(ABSTRACT)
In spite of the well-accepted belief of the relationship between cash flow and stock
price, there are some controversies about whether cash flow is a good value driver in
terms of explaining the volatility of stock prices, when compared with other value drivers,
Most of the previous studies that have focused on the relationship between stock price
and cash flow have used cross-industries data, primarily S&P 500 index. These studies do
However, the service industry is different from manufacturing in many ways. These
differences make cash play different roles in the daily operation between the service
Given these factors, whether the relationship between stock price and cash flow
indentified in previous studies will hold in the casual theme restaurant industry is the
question this study tries to answer. Therefore, a set of 20 casual theme restaurant
companies are selected through the COMPUSTAT database as the sample of this study.
In this study, the performance of cash flow, earnings and dividends helping to explain
the stock price move will be compared and ranked under the setting of casual theme
restaurants. This result will provide the management of casual theme restaurants a
guideline, which explains how to maintain the stock price increase and minimize the
The methodology of this study will follow the traditional multiple valuation model.
The logic of this model is to compare the pricing error of different value drivers and
The results of this study show that operating cash flow outperformed earnings and
dividends in the multiple valuation tests. This is different from the results of previous
studies that earnings has the strongest explanatory power in the variance of share price.
iii
DEDICATION
iv
ACKNOWLEDGEMENT
who provided invaluable guidance, suggestions and support of my study, without which
First of all, I would like to express my sincerest thanks to my advisor, Dr. Olsen, for
his guidance, encouragement, inspiration and patience. He has been providing valuable
help continuously, even during the periods that he was under medical treatments.
I also owe a deep debt to my committee members Dr. Kumar and Dr. Kwansa. Dr.
Kumar provided precious advice and support, especially on the data collecting and
analysis with his expertise on the COMPUSTAT dataset. I also thank Dr. Kwansa for his
advice and help on my thesis, especially on building the connection between the literature
Special thanks to my family and my friends who have been constantly supportive
Thank you.
v
Table of Contents
DEDICATION.................................................................................................................. iv
ACKNOWLEDGEMENT .................................................................................................v
INTRODUCTION..............................................................................................................1
Results ........................................................................................................................................33
Research Question 1 ................................................................................................33
Table 4-1 Descriptive Statistics of Three Multiples by Groups ...........................34
Table 4-2 One-Way ANOVA Results for Proposition One ..................................35
Table 4-3 Descriptives for Three Groups ...............................................................36
Table 4-4 Test of Homogeneity of Variances .........................................................37
Table 4-5 Multiple Comparisons for Three Groups .............................................38
Research Question 2 ................................................................................................40
Table 4-6 Paired Samples T Test ............................................................................40
Table 4-7 Descriptive Statistics of 320 Firms .........................................................41
Table 4-8 One-Sample Statistics..............................................................................41
Research Question 3 ................................................................................................42
Table 4-9 Multiple Valuation Test Results for All 320 Firm-years Samples ......42
Table 4-10 Results of Liu, Nissim and Thomas (2001) ..........................................43
vii
CHAPTER FIVE .............................................................................................................44
APPENDIX C SPSS Out Put for One-Way ANOVA for Proposition One ................52
viii
Chapter One
Introduction
Problem Statement
In finance literature, stock price is believed to be linked to cash flow, and this is
supported by the definition of stock and other stock valuation theories, such as efficient
In spite of the well-accepted belief of the relationship between cash flow and stock
price, there are some controversies about whether cash flow is a good value driver in
terms of explaining the volatility of stock prices, when compared with other value drivers,
such as earnings or dividends. From their research in 2001, Liu, Nissim and Thomas
stated that earnings are better than cash flows in explaining the stock price, using the U.S.
market data. This result also holds in international markets according to a later paper by
However, most of the previous studies that have focused on the relationship between
stock price and cash flow have used cross-industries data, primarily S&P 500 index, such
as Famas famous paper on efficient market hypothesis, Shillers variance bound tests in
1981, Ackert and Smiths paper in 1993, and Lius paper in both 2001 and 2007. These
1
It is known that, the service industry is different from manufacturing in many ways,
in the production and delivery of the service, heterogeneity, and perish ability. These
features make the service industry different from the manufacturing industry in the
usually keep a large amount of inventory of raw materials as well as finished goods, and
they do a lot of credit buying and selling. However, casual theme restaurants are
generally viewed as a cash business. They hardly keep finished goods in inventory,
neither a lot of raw materials, like the manufacturing industry usually does. This makes
Given these factors, whether the relationship between stock price and cash flow
indentified in previous studies will hold in the casual theme restaurant industry is the
question this study tries to answer. Therefore, a set of 20 casual theme restaurant
companies are selected through the COMPUSTAT database as the sample of this study.
In this study, the performance of cash flow, earnings and dividends helping to explain
the stock price move will be compared and ranked under the setting of casual theme
restaurants. This result will provide the management of casual theme restaurants a
guideline, which explains how to maintain the stock price increase and minimize the
2
Methodology Used in This Study
The methodology of this study will follow the traditional multiple valuation model,
which requires that the price of firm i (in the casual theme restaurants sample set) in year
Where xit is the value driver for firm i in year t , t is the multiple on the value driver and
The logic of this model is to compare the pricing error of different value drivers and
Results
The results of this study show that operating cash flow outperformed earnings and
dividends in the multiple valuation tests, different from previous studies that earnings has
3
Chapter Two
Literature Review
In this chapter, the previous research that addressed the relationship between stock
price and cash flow will first be discussed. Then, the differences between the
manufacturing industry and service industry will be compared and contrasted, and the
relationship between stock price and cash flow will be examined within a service industry
other than under a cross-industries setting. After that, this chapter will close with the
The research on the determination of stock price has been an active area for a long
time, ever since the very beginning stage of stock markets. What factors determine the
changes of stock price? The question has been answered variously from the animal
spirits of Keynes (Keynes 1936) to the Market Efficiency Hypothesis of Fama (1970).
The value of a stock theoretically can be calculated based on the definition of security
assets, by discounting all the future dividends with an appropriate discount rate. However,
stock price in the empirical world sometimes seems to be too volatile to align with this
Among all the stock valuation models, the Efficient Market Hypothesis, the most
famous model, will be discussed and the challenge brought by Shiller and other
economists about this model will also be mentioned. Then, different opinions regarding
4
the relationship between stock price and cash flow are presented. At the end of this
chapter, the performance of cash flow will be compared with other value drivers, such as
An asset value is determined by the present value of its future cash flows. A stock
provides two kinds of cash flows. First, stocks often pay dividends on a regular basis.
Second, the stockholder receives the sale price when selling the stock. Based on the
different growth patterns that a certain stock will follow, there are three types of stock
Case 1 (Zero Growth) The value of a stock with a constant dividend is given by
Here it is assumed that Div1 = Div2 = = Div. This is just an application of the
perpetuity formula.
Case 2 (Constant Growth) Dividends grow at rate g, and the value of a common
5
Where g is the growth rate. Div1 is the dividend on the stock at the end of the first period.
These three types of valuation models are based on the stock price definition. Usually
the parameters in the models are unrealistic to obtain in the real world. Therefore, there
are some alternative valuation methods that derive from the definition, which can be
easier to handle.
The efficient market hypothesis was first expressed by Louis Bachelier and emerged
as a prominent theoretic position in the mid-1960s. In general form, the hypothesis states
that the price of a security at time t fully reflects all the available information at time t-1.
The early literature on the efficient markets hypothesis was primarily concerned with
whether market participants can make any extranormal profits by taking advantage of the
information embedded in the market. The EMH theory was further developed by Eugene
Fama with his famous efficient capital markets review published in 1970. The majority of
support for the efficient markets model, and the dominance of the efficient markets model
6
Famas paper reviewed the theory and empirical work, and refined the theory by
giving definitions for three forms of market efficiency: weak, semi-strong and strong.
Weak
Semi-strong
The concern of semi-strong form tests is whether prices efficiently adjust to other
Strong
Strong form tests concerned with whether given investors or groups have
Fama concluded from his tests that prices seem to efficiently adjust to obviously
publicly available information in weak and semi-strong form markets. Only limited
evidence against the hypothesis in the strong form tests, i.e., monopolistic access to
According to the efficient market hypothesis, stock prices always fully reflect
available information. However, this definition is too general for any empirically
testable implications (Fama 1970). Fama listed three models developed by previous
7
Expected Return or Fair Game Model
The Fair Game Efficient Market Model rules out the possibility of excess return,
which is due to information reasons. The expected value of the difference between the
observed stock price and the expected value of the value that was projected at time t
on the basis of the available information set should be zero (Fama 1970).
The Submartingale Model assumes that the expected value of period (t+1)s price,
as projected on the basis of the information set of time t, is equal to or greater than the
current price. If the expected returns and price changes are zero, then the price
The Random Walk Model assumes that the current price of a security fully
reflects available information implies that successive price changes (or more usually,
Literature regarding the differences among these models was discussed in Famas
paper. In spite of different models of market efficiency, all that is required by the EMH is
that investors' reactions be random and follow a normal distribution pattern so that the net
8
especially when considering transaction costs (including commissions and spreads). Thus,
everyone can be wrong about the market, but the market as a whole is always right.
Before the Efficient Market Hypothesis was introduced in the late 1960s, the
prevailing view was that markets were inefficient. Inefficiency was commonly believed
to exist in the United States and United Kingdom stock markets. Ever since the
Some observers dispute the notion that markets behave consistently with the efficient
and market practitioners cannot believe that man-made markets are strong-form efficient
when there are prima facie reasons for inefficiency including the slow diffusion of
information, the relatively great power of some market participants (e.g. financial
The way that markets react to surprising news is perhaps the most visible flaw in the
efficient market hypothesis. For example, news events such as surprise interest rate
changes from central banks are not instantaneously taken account of in stock prices but
rather cause sustained movement of prices over periods from hours to months.
Skeptics of EMH also argue that there exists a small number of investors who have
outperformed the market over long periods of time, in a way which is difficult to attribute
luck, including Peter Lynch, Warren Buffett, George Soros, and Bill Miller. These
investors' strategies are, to a large extent, based on identifying markets where prices do
9
not accurately reflect the available information, in direct contradiction to the efficient
The efficient market hypothesis also appears to be inconsistent with many events in
stock market history. For example, the stock market crash of 1987 saw the S&P 500 drop
more than 20% in the month of October despite the fact that no major news or events
occurred prior to the Monday of the crash, the decline seeming to have come from
nowhere. This would tend to indicate that rather irrational behavior can sweep stock
markets at random.
The relationship between stock return and market cap is also a challenge to the
efficient market hypothesis. Banz finds that average returns on small cap stocks are too
high, and the average returns on large cap stocks are too low (Banz 1981; Fama and
French 1992).
Ever since the hypothesis of market efficiency was brought out, it has been one of the
Shiller (Shiller 1981a) and LeRoy and Porter (LeRoy and Porter 1981) were two pioneers
in challenging the efficient market hypothesis by the present value model of stock prices.
Both studies have demonstrated that stock prices are too volatile to be consistent with the
10
Shiller used two data sets to compare the movements of the Pt*, which is regressed by
dividends, with the actual stock price Pt.. The two data sets contain annual observations
of the stock price indexes deflated by the Bureau of Labor Statistics wholesale price
index and the associated deflated dividends from both Standard and Poor Series and Dow
Jones Industrial Average Series. The results turned out that the volatility of stock price
appeared to be far too high five to thirteen times to be explained by the new
information about future real dividends. Therefore the efficient market hypothesis is not
These variance-bound tests compare the variance of actual stock price to an upper
is
Where () is the standard deviation, Pt is actual stock price, and Pt* is the ex post rational
stock price. The ex post rational stock price is the present discounted value of actual
dividends. Under the efficient markets model, actual stock price is the conditional
The LeRoy and Porter (1981) variance-bound tests are similar in spirit to Shiller's.
The tests differ, however, in that Shiller's test gives a simple point estimate and LeRoy
and Porter are able to attach significance levels. LeRoy and Porter also reject the model
but the rejections are not always statistically significant due to large confidence intervals.
11
Debates on Variance Bounds Tests
The rejection of the PV model by Shiller (1981a) and LeRoy and Porter (1981) has
spawned great debates and controversies in the profession. Several subsequent studies
such as Flavin (1983), Kleidon ((Kleidon 1986) and Marsh and Merton (Marsh and
Merton 1986) have criticized the distributional assumptions maintained in the Shiller test.
Early volatility tests, including Shiller (1981a), LeRoy and Porter (1981) and Blanchard
and Watson ((Blanchard and Watson 1982), were based upon the assumption that stock
prices and dividends are trend-stationary. For example, Shiller (1981a) detrended stock
prices and dividends by dividing the series by the long-term growth rate. However, in
many situations simple detrending of time series does not warrant the stationarity of the
relevant variables. When time series have unit roots, but any allowance for stationarity is
not made, then sample means and variances are not consistent estimates of population
population moments. As Marsh and Merton (1986) argue, the Shiller inequality can even
Shiller (Shiller and Grossman 1981b), Kleidon (1986), Campbell and Shiller
(Campbell and Shiller 1987; Campbell and Shiller 1988), Perron ((Perron 1988) and
DeJong and Whiteman (DeJong, Whiteman et al. 1991), among others, have undertaken
formal tests for unit roots, and Kleidon (1986), Campbell and Shiller (1987), West (West
1988), and Mankiw (Mankiw, Romer et al. 1985) have developed second-generation
variance bounds tests which allow for the non-stationarity of stock prices and dividends.
However, even the second-generation variance bounds tests do not appear to have
12
resolved the volatility controversy. They produce conflicting evidence on stock price
Mankiw et al. (1985), West (1988a) and Campbell and Shiller (1987) confirm the
tests. Another criticism is that the second-generation variance bounds tests are highly
Flavin argued that in small samples the "volatility" or "variance-bounds" tests tend to
be strongly biased toward rejection of the null hypothesis of no excess volatility. Thus the
apparent violation of the market efficiency hypothesis may be reflecting the sampling
properties of the volatility measures in small samples rather than a failure of the market
Ackert and Smith argued that the results of variance-bound tests (Leroy and Porter
1981, Shiller 1981) depend on how cash distributions to shareholders are measured.
They found apparent evidence of excess volatility when a narrow definition of cash flow
(dividends only) is applied. They were unable to reject the hypothesis of market
efficiency when the cash flow measure also included share repurchases and takeover
distributions in addition to ordinary cash dividends (Ackert and Smith 1993). Based on
Ackert and Smiths study, operation cash flow may be able to smooth the volatility of
13
Valuation Using Multiples
Valuation using multiples is a method for determining the current value of a company
(Wikipedia). To value a company, one can examine and compare the financial ratios of
relevant peer groups, multiply a ratio, or value driver, of the company by the
corresponding multiple. The multiples are usually based on the ratio of stock price to that
value driver for a group of comparable companies (Liu, Nissim et al. 2007).
The commonly used ratios include various measures of cash flow, book value,
earnings, and revenues, but earnings and cash flows are by far the most commonly used.
There is a common perception that operating cash flow is better than accounting earnings
in valuations. However, a recent study conducted by Liu, Nissin and Thomas suggested
that earnings dominated operating cash flows and dividends using U.S. market data (Liu,
Nissim et al. 2001; Liu, Nissim et al. 2002). This result also holds in international
According to Ackert and Smith (1993), narrowly defined cash flow in the variance
bounds tests leads to the rejection of efficient market hypothesis, and they proved that it
is unable to reject the hypothesis of market efficiency when using a broader cash flow
definition. Actually, within the finance literature, dividends include all cash distributions
to shareholders. For example, in the seminal work of Miller and Modigliani (Miller and
14
Modigliani 1961), cash distributed through share repurchases has the same economic role
Kleidon (1986) and Marsh and Merton (1986) discuss the problems that arise from
testing present value relations when ordinary dividends do not properly represent cash
flows. In addition, the smoothing of ordinary dividends Lintner (Lintner 1956), Fama and
Babiak (Fama and Babiak 1968) raises concerns because such behavior "implies changes
in a future residual dividend that do not show up in the currently observed dividend
series" (Kleidon (1986). Thus, tests which rely on a narrow definition of dividends may
incorrectly reject the present value relation (Ackert and Smith 1993).
The potential for problems, arising from a narrow definition of dividends, has
become more acute with the rapid growth of share repurchases and cash payments in
mergers and acquisitions. Shoven (1986) and Bagwell and Shoven (1989) show that in
recent years ordinary dividends represent less than half of the total cash distributed to
shareholders. These total cash flows are also more volatile than ordinary cash dividends
Cash flow is an accounting term that refers to the amount of cash being received and
spent by a business during a defined period of time, sometimes tied to a specific project.
Operating cash flow, cash flow provided by operations or cash flow from operating
activities, refers to the amount of cash a company generates from the revenues it brings in,
15
excluding costs associated with long-term investment on capital items or investments in
securities.
Earnings represent the difference between revenues and charges, leading to a change
in net worth during a given period. Since the rationale behind the income statement is not
the same as for a cash flow statement, some cash flows do not appear on the income
statement. Likewise, some revenues and charges are not shown on the cash flow
Among all the previous studies, earnings have proved to have the greatest
explanatory power (Gallizo and Salvador 2006) to stock price volatility (Liu, Nissim et al.
2002; Liu, Nissim et al. 2007). However, some financial analysts argue that it is difficult
to compare earnings across firms because of the variety of methods used to calculate
accrual items, that managers can manipulate accruals to alter reported earnings, and that
accounting earnings can result in dysfunctional behavior since managers frequently select
projects based on earnings rather than discounted cash flows (Wilson and O'Brien 1986).
However, Liu, Nissim and Thomas (2007) argue that contrary to the common
perception that operating cash flows are better than accounting earnings at explaining
equity valuations, recent studies suggest that valuations derived from industry multiples
based on reported earnings are closer to traded prices than those based on reported
operating cash flows. The question addressed in the article is whether the balance tilts in
favor of cash flows when the following are considered: (1) forecasts rather than reported
numbers, (2) dividends rather than operating cash flows, (3) individual industries rather
16
than all industries combined, and (4) companies in non-U.S. markets. In all cases studied,
earnings dominated operating cash flows and dividends (Liu, Nissim et al. 2007) .
Liu, Nissim and Thomas believe that at a conceptual level, earnings should be the
more representative value driver because earnings reflect value changes regardless of
when the cash flows occur. Still, many practitioners, arguing that accruals involve
discretion and are often used to manipulate earnings, prefer to use cash flow multiples.
They also point out that expenses such as depreciation and amortization deviate
substantially from actual declines in value because they are based on ad hoc estimates
that are, in turn, derived from potentially meaningless historical costs (Liu, Nissim et al.
2007).
Other studies have also been done to compare the information content between
earnings and cash flows. Unfortunately, there is not a general agreement at this time.
Wilson concludes that for a given amount of earnings, the share market reacts more
favorably to cash flows than current accruals (Wilson 1987). However, Bernard and
Stober failed to generalize Wilsons finding to a larger period (Bernard and Stober 1989).
From the discussion of previous studies, it can be assumed that a relationship between
stock price and cash flow exists. In the efficient market hypothesis model, if the market is
efficient, then the stock price is determined by the future dividends. Any change of stock
price is due to the new information regarding future dividends. Although the efficient
17
market hypothesis was challenged by some economists with the boundary test, which
asserts that the stock price is too volatile to be measured by the discounted present value
of future dividends, studies also show that the rejection of the present value model may
be because of the small sample size or the narrowly defined cash flow.
However, most of the previous studies focused on the S&P 500 or Dow Jones
manufacturing industries. Although, in the study of Liu, Nissim and Thomas in 2007,
they conducted the industry-by-industry test to compare the performance of earnings and
operating cash flow. Liu, Nissim and Thomas exclude firms not covered by IBES,
typically with low and medium market capitalization, which casual theme restaurants
usually belong to. It is not focused on the study of casual theme restaurants; therefore, the
relation between the stock price and operating cash flow in casual theme restaurants is
In the following section, the relationship between stock price and cash flow will be
put in a new industry context, the hospitality industry, and the differences between
manufacturing industry and service industry as well as how these differences may affect
First, through the discussion of previous studies that focus on the relationship
between stock price and cash flow, it was found that all of them were conducted under a
18
cross-industries setting. However, the service industry is well-known for its unique
participation in the production and delivery of the service, heterogeneity, and perish
ability, which distinguish the service industry from the manufacturing industry. These
features create the underpinning need to explain the supply and demand relationship and
to help to differentiate them from manufacturing enterprises (Olsen, Tse et al. 2007).
In the manufacturing industry, the consumer products are most durable and demand
market at the time. These products are likely to be produced in economical quantities to
ensure that there will be sufficient numbers to meet the total demand. Items produced in
excess of current demand are usually inventoried to buffer against unexpected changes in
the demand curve and/or sold later. Seldom are these inventory items considered highly
These features of the demand curve for manufacturing industries are seldom present
in the service industry. There are several reasons for this. First, it is difficult to
aggregate total demand in order to predict how many products will be sold by a service
provider over a specific planning period. The nature of the demand curve in the service
industry is local in nature. Second, finished products cannot be stored for much longer
than 15 minutes before they become unacceptable to the customer. The supply of
individual products produced in each unit must be sold almost immediately. Thus, the
demand curve can be said to be very temporal, fluctuating from hour to hour, day to day,
week to week, and month to month. It is not influenced as much by macro features such
19
as demographics but more by local economic conditions, local competition, and even
weather. As can be seen here, the demand curve for service businesses contains
characteristics not similarly found in the large scale consumer durable goods businesses
Another point of difference between manufacturing and service has to do with the
buffer firms from wide swings in the demand curve of the business. If finished products
remain too long in inventory, management can alter their prices in order to reduce
inventory. As was pointed out above, the products and services produced by service firms
such as those in the hospitality industry have little to no inventory life. If a restaurant
does not fill its supply of seats on any given day it can never sell them again (Olsen, Tse
et al. 2007). In other words, this inventory is highly perishable with almost no shelf life,
which determines that the restaurant industry is predominately a cash business, almost
without inventory. Therefore, whether the sensitivity of stock price to cash flow will hold
the same level for both cross-industries setting and service industry context is
questionable.
Second, most of previous research uses S&P 500 index data. However S&P 500
index usually represents the large cap firms in the manufacturing sector with a higher
average book-to-market ratio than the casual theme industry. Consequently, it is hard to
make a direct statement to an industry with small capitalization and low book-to-market
20
Therefore, it is necessary to study the relationship between stock price and operating
cash flow within the casual theme restaurants industry which can provide a better
understanding of operating cash flow for hospitality financial managers. In this thesis, the
relationship between stock price and operating cash flow will be tested using casual
theme restaurants data. A comparison of this relationship between Russell 3000 and
casual theme restaurants will also be conducted to examine the difference that may be
brought by the variation of operating cash flow, market capitalization and book-to-market
ratio.
It is obvious that the hospitality industry differs from the manufacturing industry
relationship between stock price and cash flow in previous studies, which were conducted
in a cross-industries context, may not hold in hospitality. Here are the propositions in this
1. We can expect there is no difference in the impact of cash flow on stock price
2. We can expect there is no difference in the impact of cash flow, earnings and
samples.
21
3. We can expect there is no difference in the impact of cash flow on stock price
From this study, we expect stock price has a greater sensitivity to cash flow of casual
22
Chapter Three
Methodology
The preceding chapters reviewed the literature and identified the objectives of this
study. This chapter provides the research propositions and research questions, the
introduction of data collection, and introduction of research models used for data analysis.
Research Questions:
As discussed in chapter two, almost all of the previous studies focused on the large
capitalization firms. However, most of the casual theme restaurants belong to the small
capitalization category. Then whether market capitalization will affect the impact of cash
flow on stock price in casual theme restaurants? Whats the difference in the impact of
cash flow on share price between large and small casual theme restaurants? Proposition 1
Proposition 1: We can expect there is no difference in the impact of cash flow on stock
Research Questions:
Cash flow, earnings and dividends are ranked in terms of explaining the stock price
23
differences between manufacturing industry and service industry, whether the result will
hold in a casual theme restaurants setting? These questions bring out proposition 2.
Proposition 2: We can expect there is no difference in the impact of cash flow, earnings
and dividends on stock price between cross-industries and casual theme restaurant
samples.
Research Questions:
Due to the different nature of large capital manufacturing firms and small capital
service firms, whether the impact of cash flow on stock price in a broad market
capitalization index will hold in the casual theme restaurant is questionable. Previous
studies used S&P 500 index as sample set, which includes cross-industry firms with the
largest capitalization. This study tries to make clear the difference in the impact of cash
flow on stock price between S&P 500 index and casual theme restaurant firms. These
Proposition 3: We can expect there is no difference in the impact of cash flow on stock
look at.
24
Part II Data Collection
In this part, an introduction of the data collection process will be provided. It includes
the dataset that the entire sample firms data came from, the standards used to define the
sample frame in that dataset, and the measurements and calculations of the variables.
Firm Selection
Sample firms used in this study are selected from casual theme restaurants following
three steps:
First, COMPUSTAT North America Industry Annual was chosen as the source
dataset. Two standards are used to select sample firms from the COMPUSTAT North
NAICS is a hierarchical structure and can consist of up to six digits/levels. The first
two digits of the structure designate the NAICS sectors that represent general categories
of economic activity. The third digit designates the subsector, the fourth digit designates
the industry group, the fifth digit designates the NAICS industry, and the sixth digit
Casual theme restaurants are under the classification Full Service Restaurants with
25
Industry Classification Code
a company's primary operation. SPC assigns these codes by analyzing the sales
breakdown from a company's 10K and annual report. The codes are based on the U.S.
SIC classification. The variable name of this code in COMPUSTAT dataset output is
DNUM.
Casual theme restaurants belong to the Eating Places with the DNUM=5812.
Therefore, the sample firms are selected from the COMPUSTAT North America
Second, firm samples from the first step with annual data available from 1990 to 2005
are kept. Twenty firms are left after this step, which are shown in Appendix A.
Variables
Stock price
Stock price at the end of fiscal year is chosen in this study, which is DATA #1991 in
COMPUSTAT dataset.
1
#* is the Data variable number in the COMPUSTAT.
26
OCF = EBITDA (#13) total of interest expense (#15) tax expense (#16) net
Where net change in working capital is change in current assets (#4) change in cash
and cash equivalents (#1) change in current liabilities (#5) plus change in debt included
Per share cash flow from operations is defined as OCF deflated by shares outstanding
(#25).
Net Income
(#237).
Dividends
Value Drivers
27
Three value drivers will be considered and compared in this study: Cash flow from
Multiple Valuation
The traditional multiple valuation method is followed, which requires that the price of
firm i (from the comparable group) in year t ( pit ) is directly proportional to the value
driver:
Where xit is the value driver for firm i in year t , t is the multiple on the value driver and
To allow comparison of valuation errors for stocks of different values, the pricing
error can be deflated by the stock price (Liu, Nissim et al. 2007):
xit it
1 t (2-2)
pit pit
Multiples Construction
An industry multiple is constructed for each value driver of each company, based on
the prices and value drivers for all remaining companies in the sample set. In order to
avoid the targets valuation being contaminated by its own price, the target company is
Based on the previous studies, harmonic mean of the ratio of price is chosen, which is
calculated by first finding the average value driver to price for the sample set and then
inverting that average (Liu, Nissim et al. 2007). Harmonic mean provides a way to
28
mitigate the effect of low value and reduce the impact on the multiple (Liu, Nissim et al.
2007).
For an illustration, assume there are five companies in the hospitality industry in the
U.S. in 1990, indexed by i =1,2,5, with earnings per share of $1.50,$3.00, $2.50, $0.50
and $2.00 and share prices of $20, $35, $45, $25 and $30, respectively. Assume that the
multiple that is relevant for company i = 3 is being calculated. If the average ratio of
price to EPS of the remaining four companies is chosen, the multiple will be:
1 20 35 25 30
Average P/E = ( ) 22.5 (2-3)
4 1.50 3.00 0.50 2.00
However, the harmonic mean P/E would be:
1
Harmonic mean P/E = 16.17 (2-4)
(1/ 4)[(1.50 / 20) (3.00 / 35) (0.50 / 25) (2.00 / 30)
As shown in the results, the harmonic mean method reduces the impact of company i
1. P/E
2. P/D
3. P/C
Price to operating cash flow ratio, the multiple of operating cash flow
29
Analysis Procedure
Based on the previous description, 16-year data of 20 sample casual theme restaurants
1. Dividends per share (#21) and share prices per share (#199) will be changed to
2. Price to earnings ratio (P/E), price to dividend ratio (P/D) and price to operating
cash flow ratio (P/C) for each firm during each year will be calculated.
3. The industry multiples for earnings, dividend and operating cash flow will be
1. One-Way ANOVA
variance is used to test the hypothesis that several means are equal. This technique is
to know which means differ. There are two types of tests for comparing means: a
30
priori contrasts and post hoc test. Contrasts are tests set up before running the
experiment, and post hoc tests are run after the experiment has been conducted.
For each group, number of cases, mean, standard deviation, standard error of the
mean, minimum, maximum, 95%-confidence interval for the mean, Levene's test for
means for each dependent variable, user-specified a priori contrasts, and post hoc
among different market cap groups. This will be used to test proposition 1. The
sample set will be divided into three categories according to their market value:
Small-Cap: Market value is bigger than 250 million dollars and smaller than or
The differences of variances and means of pricing errors of P/E, P/D and P/C
2. Paired-Samples T Test
The Paired-Samples T Test procedure compares the means of two variables for a
single group. It computes the differences between values of the two variables for each
31
For each variable, mean, sample size, standard deviation, and standard error of the
mean will be provided in the output. For each pair of variables: correlation, average
difference in means, t test, standard deviation and standard error of the mean
pricing error means computed by P/E, P/D and P/C are different from each other.
3. One-Sample T Test
The One-Sample T Test procedure tests whether the mean of a single variable
One-Sample T Test is chosen for proposition 2. It will be used to test whether the
Summary
32
Chapter Four
Research Results
The basis for conducting multiple valuation tests within the casual theme restaurants
has been provided in the previous three chapters. In chapter one, the imperative of this
study has been discussed. Previous studies focused on the relationship between share
price and operating cash flow, and the rationale for using multiple valuation model were
all reviewed and discussed in chapter two. Chapter three has provided the detailed
methodologies to test the research questions in this study. In this chapter, the results of
Results
As discussed in chapter two, almost all of the previous studies focused on the large
capitalization firms. However, most of the casual theme restaurants belong to a small
capitalization category. Then whether market capitalization will affect the impact of cash
flow on stock price in casual theme restaurants? Whats the difference in the impact of
cash flow on share price between large and small casual theme restaurants? Proposition 1
Proposition 1: We can expect there is no difference in the impact of cash flow on stock
In order to answer this question, the 320 firm-years samples are classified into three
categories:
33
1. Micro-Cap: capitalization below $250 million. (Group 1, 194 firm-years)
firm-years)
years)
Table 4-1 shows the descriptive statistics of three multiples, classified by the market
2
Price to earnings ratio
3
Price to dividend ratio
4
Price to operating cash flow ratio
34
Table 4-2 One-Way ANOVA Results for Proposition One
Sum of Mean
Squares df Square F Sig.
5
PRICE_ERROR_PE Between Groups 1578.274 2 789.137 .452 .637
Within Groups 539203.216 309 1744.994
Total 540781.490 311
6
PRICE_ERROR_PD Between Groups 79888.968 2 39944.484 7.216 .001
Within Groups 1666128.834 301 5535.312
Total 1746017.802 303
7
PRICE_ERROR_PC Between Groups 168.922 2 84.461 3.918 .021
Within Groups 6488.063 301 21.555
Total 6656.985 303
Table 4-2 shows the SPSS output of the One Way ANVOA. Dependent variables are
error of Price to Earnings ratio among different market cap groups are not significantly
different from each other at a 95% confidence level (.637>.05, it is failed to reject the
null hypothesis).
5
Pricing error of price to earnings ratio
6
Pricing error of price to dividend ratio
7
Pricing error of price to operating cash flow ratio
35
However, the variances of pricing error of Price to Dividend and Price to Operating
Cash Flow among different market cap groups are significantly different from one other
These are the analyses regarding variances. The following output presents the
According to the results in this output, regarding the pricing error of Price to Earnings
ratio, Small-Cap group has the lowest values of both mean (-1.3888) and the standard
36
most powerful variable in explaining the variance of share price for Middle-Cap casual
However, as to the pricing error of Price to Dividend ratio, Micro-Cap has the lowest
values of both mean (1.6349) and standard error (.92059), followed by Small-Cap
error=61.77618). Therefore, price to dividend ratio is the most powerful value driver in
explaining the variance of share price for Micro-Cap casual theme restaurant firms.
The results of price to operating cash flow show that Small-Cap group has the lowest
values of both mean (-.0900) and standard error (.14661), followed by Middle-Cap group
error=.43215). Therefore, price to operating cash flow is the most powerful value driver
in explaining the variance of share price for Small-Cap causal theme restaurant firms.
Table 4-4 shows whether the equal variance assumption is satisfied for each value
driver. Table 4-5 presents the statistic results of mean difference tests.
37
Table 4-5 Multiple Comparisons for Three Groups
Dependent Variable (I)MARKET_CAP (J)MARKET_CAP Mean Difference (I-J) Std. Error Sig.
PRICE_ERROR_PE LSD 1 2 -4.66999 4.98238 .349
3 -3.67049 11.98382 .760
2 1 4.66999 4.98238 .349
3 .99950 12.23408 .935
3 1 3.67049 11.98382 .760
2 -.99950 12.23408 .935
Tamhane 1 2 -4.66999 4.00563 .570
3 -3.67049 4.02009 .741
2 1 4.66999 4.00563 .570
3 .99950 1.14588 .771
3 1 3.67049 4.02009 .741
2 -.99950 1.14588 .771
PRICE_ERROR_PD LSD 1 2 -19.36182(*) 9.04517 .033
3 -73.31354(*) 21.35126 .001
2 1 19.36182(*) 9.04517 .033
3 -53.95172(*) 21.85235 .014
3 1 73.31354(*) 21.35126 .001
2 53.95172(*) 21.85235 .014
Tamhane 1 2 -19.36182 9.63018 .134
3 -73.31354 61.78304 .592
2 1 19.36182 9.63018 .134
3 -53.95172 62.51552 .789
3 1 73.31354 61.78304 .592
2 53.95172 62.51552 .789
PRICE_ERROR_PC LSD 1 2 1.49591(*) .55855 .008
3 1.78125 1.50774 .238
2 1 -1.49591(*) .55855 .008
3 .28533 1.53287 .852
3 1 -1.78125 1.50774 .238
2 -.28533 1.53287 .852
Tamhane 1 2 1.49591(*) .45634 .004
3 1.78125(*) .50015 .002
2 1 -1.49591(*) .45634 .004
3 .28533 .29136 .715
3 1 -1.78125(*) .50015 .002
2 -.28533 .29136 .715
According to the results from multiple comparisons, since the equal variance
assumption is not satisfied at a 95% confidence level (.087>.05), the Tamhane test is
chosen. Based on the p-value, all of the mean differences of price to earnings pricing
38
As to the price to dividend ratio, the p-value of the Levene Statistic test is .000(<.05),
therefore, the equal variance assumption is satisfied. The LSD test should be chosen. It
can be concluded that the means are significantly different at the 95% confidence level
among three groups (.033<.05, .001<.05, .014<.05, the null hypothesis is rejected),
because group 3 has a significantly higher mean than group 2 and group 1.
Therefore, price to dividend has a different power in explaining the variance of share
However, in the results of price to operating cash flow ratio, the p-value of Levene
Statistic is .001<.05, equal variance assumption is satisfied. The LSD test should be
chosen. Based on the p-value, the mean difference between group 1 and group 2 are
significantly different from each other (.008<.05, null hypothesis is rejected), because
group 1 has a significantly higher mean than group 2. However, the mean difference
between group 1 and group 3 and the mean difference between group 2 and group 3 are
not significantly different from each other (.238<.05, .852<.05, failed to rejected null
hypothesis).
In summary, to answer research question one, the operating cash flow has
significantly different impacts on the share price between Micro-Cap and Small-Cap
casual theme restaurant firms. The impact on the share price of Small-Cap is stronger
39
Research Question Two
Cash flow, earnings and dividends are ranked in terms of explaining the stock price
differences between the manufacturing industry and the service industry, whether the
result will hold in a casual theme restaurants setting? These questions bring out
proposition 2.
Proposition 2: We can expect there is no difference in the impact of cash flow, earnings
and dividends on stock price between cross-industries and casual theme restaurant
samples.
To test this proposition, 320 firm-years samples are analyzed without differentiation
Paired Differences
t df Sig. (2-tailed)
Std. 95% Confidence Interval
Std. Error of the Difference
Mean Deviation Mean
Lower Upper
Pair PRICE_ERROR_PE -
-15.91361 87.09242 4.99509 -25.74307 -6.08414 -3.186 303 .002
1 PRICE_ERROR_PD
Pair PRICE_ERROR_PE -
-5.08652 43.44719 2.49187 -9.99008 -.18297 -2.041 303 .042
2 PRICE_ERROR_PC
Pair PRICE_ERROR_PD -
11.08204 77.14984 4.48424 2.25688 19.90720 2.471 295 .014
3 PRICE_ERROR_PC
From the results of Paired-Sample T Test, it is obvious that all the p-values are lower
than .05. Therefore, the null hypotheses are rejected. The mean differences between three
40
value drivers are significantly different from each other at the 95% confidence level.
Price to Dividend has a lowest mean difference (-5.08652) of pricing error, followed by
Next, whether the means are different from zero are tested by One-Sample T Test.
According to the results, the pricing error of Price to Operating Cash Flow has the
lowest mean (.0812) and standard error mean(.26883), followed by pricing error of Price
41
Therefore, to answer research question two, cash flow has the strongest explanatory
power of the variance of share price of casual theme restaurant firms, followed by
Due to the different nature of large capital manufacturing firms and small capital
service firms, whether the impact of cash flow on stock price in a broad market
capitalization index will hold in casual theme restaurants is questionable. Previous studies
used S&P 500 index as sample set, which includes cross-industry firms with the largest
capitalization. This study tries to make clear the difference in the impact of cash flow on
stock price between S&P 500 index and casual theme restaurant firms. These questions
Proposition 3: We can expect there is no difference in the impact of cash flow on stock
Table 4-9 Multiple Valuation Test Results for All 320 Firm-years Samples
42
Table 4-10 Results of Liu, Nissim and Thomas (2001)
In the study of Liu, Nissim and Thomas in 2002(Liu, Nissim et al. 2001; Liu, Nissim
et al. 2002), S&P 500 index has been chosen as a sample set. Their results showed that
earnings could be a better indicator than operating cash flow in the multiple valuation.
P/Es values were all lower than P/C in terms of mean, median and standard deviation, as
However, in this study, with 320 firm-years casual theme restaurant samples, the
result came out differently from previous studies. P/C, the multiple of operating cash
flow has the lowest values in all of the three measures: mean, median and standard error.
Therefore, from this study, it can be concluded that operating cash flow has different
impacts on share price between casual theme restaurants and S&P 500 index samples.
Operating cash flow is more powerful in multiple valuation tests with casual theme
43
Chapter Five
Chapter four has presented the results of the multiple valuation tests conducted under
the casual theme restaurants setting over the period of 1990 to 2005. This chapter
summarizes the results and presents the contribution, limitations and suggestions for
further study.
First, the operating cash flow has significantly different impacts on the share price
between Micro-Cap and Small-Cap casual theme restaurant firms. The impact on the
share price of Small-Cap is stronger than on the share price of Micro-Cap casual theme
restaurant firms.
Second, the operating cash flow has the strongest explanatory power of the variance
of share price of casual theme restaurant firms, followed by earnings and dividend.
Research Three
Third, according to the results of this study, the operating cash flow has different
impacts on share price between casual theme restaurants and S&P 500 index samples.
44
Operating cash flow is more powerful in multiple valuation tests with casual theme
Among all the general goals of management, increasing share prices and minimizing
the volatility of stocks could be one the most important task for managers, without
Various studies have been conducted to provide managers with feasible and effective
indicators to explain the move of share prices. According to the results of previous
studies, earning has been proved to have the strongest power in explaining the variance of
share price. However, most of the previous studies that have focused on the relationship
between stock price and cash flow have used cross-industries data, primarily S&P 500
index. These studies do not distinguish service industry from manufacturing industry.
As we all know, the service industry is different from manufacturing in many ways,
in the production and delivery of the service, heterogeneity, and perish ability. These
features make the service industry different from the manufacturing industry in the
usually keep a large amount of inventory of raw materials as well as finished goods. And
they do a lot of credit buying and selling. However, the casual theme restaurant is
generally viewed as a cash business. They hardly keep finished goods in inventory,
45
neither a lot of raw materials, like the manufacturing industry usually does. This makes
The results of this study provide a more specific guideline to casual theme restaurant
managers that operating cash flow is the best indicator to track share price, followed by
earnings and dividends. Stable share price can be achieved, to some extent, by smoothing
Limitations
The fundamental limitation of this study would be the small sample size. In order to
gather enough available data information to carry on the analysis, non-public traded firms
are excluded from this study. Therefore, only 20 public-traded casual theme restaurants
are available with the data during the period of 1990 to 2005. Previous studies conducted
with cross-sectional data can have several hundred sample firms. This limitation might
lead the results of this study questionable. The statistical output of this study may be
A second limitation would be the small size (13) of the Middle-Cap category in the
analysis of research question one. Therefore, this group should be taken out from the
analysis in research question one. Actually, none of the results is significant regarding the
46
Suggestions for Further Studies
As stated above, small sample size is a fundamental limitation of this study. To obtain
a more general result, global sample set can be constructed, other than just limited to the
47
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49
Appendix A Sample Firms
50
Appendix B
Group 1
Group 2
Group 3
51
Appendix C
Des criptives
Levene
Statistic df 1 df 2 Sig.
PRICE_ERROR_PE 2.466 2 309 .087
PRICE_ERROR_PD 24.659 2 301 .000
PRICE_ERROR_PC 7.514 2 301 .001
ANOVA
Sum of
Squares df Mean Square F Sig.
PRICE_ERROR_PE Betw een Groups 1578.274 2 789.137 .452 .637
Within Groups 539203.2 309 1744.994
Total 540781.5 311
PRICE_ERROR_PD Betw een Groups 79888.968 2 39944.484 7.216 .001
Within Groups 1666129 301 5535.312
Total 1746018 303
PRICE_ERROR_PC Betw een Groups 168.922 2 84.461 3.918 .021
Within Groups 6488.063 301 21.555
Total 6656.985 303
52
Multiple Com parisons
Mean
Dif f erence 95% Conf idence Interval
Dependent Variable (I) MA RKET_CAP (J) MARKET_CA P (I-J) Std. Error Sig. Low er Bound Upper Bound
PRICE_ERROR_PE Tukey HSD 1.00 2.00 -4.66999 4.98238 .617 -16.4038 7.0638
3.00 -3.67049 11.98382 .950 -31.8932 24.5522
2.00 1.00 4.66999 4.98238 .617 -7.0638 16.4038
3.00 .99950 12.23408 .996 -27.8125 29.8115
3.00 1.00 3.67049 11.98382 .950 -24.5522 31.8932
2.00 -.99950 12.23408 .996 -29.8115 27.8125
LSD 1.00 2.00 -4.66999 4.98238 .349 -14.4737 5.1337
3.00 -3.67049 11.98382 .760 -27.2507 19.9097
2.00 1.00 4.66999 4.98238 .349 -5.1337 14.4737
3.00 .99950 12.23408 .935 -23.0731 25.0721
3.00 1.00 3.67049 11.98382 .760 -19.9097 27.2507
2.00 -.99950 12.23408 .935 -25.0721 23.0731
Tamhane 1.00 2.00 -4.66999 4.00563 .570 -14.3155 4.9755
3.00 -3.67049 4.02009 .741 -13.3521 6.0111
2.00 1.00 4.66999 4.00563 .570 -4.9755 14.3155
3.00 .99950 1.14588 .771 -1.8635 3.8625
3.00 1.00 3.67049 4.02009 .741 -6.0111 13.3521
2.00 -.99950 1.14588 .771 -3.8625 1.8635
PRICE_ERROR_PD Tukey HSD 1.00 2.00 -19.36182 9.04517 .084 -40.6665 1.9429
3.00 -73.31354* 21.35126 .002 -123.6036 -23.0235
2.00 1.00 19.36182 9.04517 .084 -1.9429 40.6665
3.00 -53.95172* 21.85235 .037 -105.4220 -2.4814
3.00 1.00 73.31354* 21.35126 .002 23.0235 123.6036
2.00 53.95172* 21.85235 .037 2.4814 105.4220
LSD 1.00 2.00 -19.36182* 9.04517 .033 -37.1616 -1.5620
3.00 -73.31354* 21.35126 .001 -115.3302 -31.2969
2.00 1.00 19.36182* 9.04517 .033 1.5620 37.1616
3.00 -53.95172* 21.85235 .014 -96.9544 -10.9490
3.00 1.00 73.31354* 21.35126 .001 31.2969 115.3302
2.00 53.95172* 21.85235 .014 10.9490 96.9544
Tamhane 1.00 2.00 -19.36182 9.63018 .134 -42.7183 3.9947
3.00 -73.31354 61.78304 .592 -244.4592 97.8321
2.00 1.00 19.36182 9.63018 .134 -3.9947 42.7183
3.00 -53.95172 62.51552 .789 -225.8787 117.9752
3.00 1.00 73.31354 61.78304 .592 -97.8321 244.4592
2.00 53.95172 62.51552 .789 -117.9752 225.8787
PRICE_ERROR_PC Tukey HSD 1.00 2.00 1.49591* .55855 .021 .1803 2.8115
3.00 1.78125 1.50774 .465 -1.7700 5.3325
2.00 1.00 -1.49591* .55855 .021 -2.8115 -.1803
3.00 .28533 1.53287 .981 -3.3251 3.8958
3.00 1.00 -1.78125 1.50774 .465 -5.3325 1.7700
2.00 -.28533 1.53287 .981 -3.8958 3.3251
LSD 1.00 2.00 1.49591* .55855 .008 .3968 2.5951
3.00 1.78125 1.50774 .238 -1.1858 4.7483
2.00 1.00 -1.49591* .55855 .008 -2.5951 -.3968
3.00 .28533 1.53287 .852 -2.7312 3.3018
3.00 1.00 -1.78125 1.50774 .238 -4.7483 1.1858
2.00 -.28533 1.53287 .852 -3.3018 2.7312
Tamhane 1.00 2.00 1.49591* .45634 .004 .3980 2.5938
3.00 1.78125* .50015 .002 .5663 2.9962
2.00 1.00 -1.49591* .45634 .004 -2.5938 -.3980
3.00 .28533 .29136 .715 -.4911 1.0618
3.00 1.00 -1.78125* .50015 .002 -2.9962 -.5663
2.00 -.28533 .29136 .715 -1.0618 .4911
*. The mean dif f erenc e is s ignif icant at the .05 level.
53
Homogeneous Subsets
PRICE_ERROR_PE
Subs et
f or alpha
= .05
MARKET_CAP N 1
Tukey HSDa,b 1 186 -6.0588
3 13 -2.3883
2 113 -1.3888
Sig. .893
Means f or groups in homogeneous subsets are dis played.
a. Uses Harmonic Mean Sample Siz e = 32.913.
b. The group sizes are unequal. The harmonic mean
of the group s iz es is used. Type I error levels are
not guaranteed.
PRICE_ERROR_PC
Subs et
f or alpha
= .05
MARKET_CAP N 1
Tukey HSDa,b 3 10 -.3753
2 111 -.0900
1 183 1.4060
Sig. .348
Means f or groups in homogeneous subsets are dis played.
a. Uses Harmonic Mean Sample Siz e = 26.207.
b. The group sizes are unequal. The harmonic mean
of the group s iz es is used. Type I error levels are
not guaranteed.
54
Appendix D
SPSS Output for Paired-Samples T Test
Std. Error
Mean N Std. Deviation Mean
Pair PRICE_ERROR_PE -4.3287 304 42.24033 2.42265
1 PRICE_ERROR_PD 11.5849 304 75.91070 4.35378
Pair PRICE_ERROR_PE -4.2854 304 42.24039 2.42265
2 PRICE_ERROR_PC .8012 304 4.68724 .26883
Pair PRICE_ERROR_PD 11.9180 296 76.90555 4.47004
3 PRICE_ERROR_PC .8360 296 4.74538 .27582
N Correlation Sig.
Pair PRICE_ERROR_PE &
304 -.006 .917
1 PRICE_ERROR_PD
Pair PRICE_ERROR_PE &
304 -.206 .000
2 PRICE_ERROR_PC
Pair PRICE_ERROR_PD &
296 -.021 .723
3 PRICE_ERROR_PC
55
Appendix E
Descriptive Statistics of 320 Firms
56
Appendix F
SPSS Output for One Sample T Test
Std. Error
N Mean Std. Deviation Mean
PRICE_ERROR_PE 312 -4.2145 41.69949 2.36077
PRICE_ERROR_PD 304 11.5849 75.91070 4.35378
PRICE_ERROR_PC 304 .8012 4.68724 .26883
Test Value = 0
95% Conf idence
Interval of the
Mean Dif f erence
t df Sig. (2-tailed) Dif f erence Low er Upper
PRICE_ERROR_PE -1.785 311 .075 -4.21449 -8.8596 .4306
PRICE_ERROR_PD 2.661 303 .008 11.58486 3.0174 20.1523
PRICE_ERROR_PC 2.980 303 .003 .80116 .2721 1.3302
57