First Advisor

Grover Rodich

Date of Publication

1-1-1980

Document Type

Dissertation

Degree Name

Doctor of Philosophy (Ph.D.) in Systems Science

Department

Systems Science

Language

English

Subjects

System design, Business enterprises -- Finance, System theory

DOI

10.15760/etd.872

Physical Description

3, vii, 161 leaves: ill. 28 cm.

Abstract

The purposes of this research report are (1) to introduce into financial management theory, the concepts of stability, resilience and steady state from general systems theory, (2) to formulate hypotheses about the relationships among rate of return, business risk, stability and resilience as exhibited by business systems, (3) to construct quantifiable surrogates for these concepts in terms of the financial operating characteristics of business systems and (4) to test the hypotheses with an appropriate statistical methodology. Business systems are investigated from two different perspectives or levels of aggregation. The first level treats each individual firm as the business system. The second level aggregates the individual firms into their respective industries based on the United States Department of Commerce's Standard Industrial Classification code, SIC. By applying this model at both levels, we can generate two duplicate sets of six hypotheses, one set for individual firms and one set for industries. The six hypotheses are: (1) Business Risk and Rate of Return are negatively correlated, (2) Resilience and Rate of Return are negatively correlated, (3) Stability and Rate of Return are positively correlated, (4) Business Risk and Resilience are positively correlated, (5) Resilience and Stability are negatively correlated and (6) Stability and Business Risk are negatively correlated. The theoretical contribution of this research project derives from the integration of general systems theory and financial management theory. The integration is based on equating the rate of return from financial theory with the steady state from systems theory. Business risk is defined in terms of the relative fluctuation in the rate of return over time. Stability is that property of a system that allows the system to maintain a steady state in spite of small or temporary perturbations to the system. Resilience is that property of a system that allows the system to maintain a steady state in spite of large or permanent perturbations. The empirical contribution of this research project is the determination of statistical relationships among rate of return, business risk, stability and resilience within business systems. The raw data collected for this study were derived from the Compustat II tape files available at Idaho State University. These files contain financial data on several thousand industrial and non-industrial companies listed on the major stock exchanges and Over-the-Counter stock exchanges. The diagram above summarizes the statistical results of this research project. The numerical values superimposed upon the connecting lines are the statistical results of the tests of the twelve hypotheses and represent respectively; the spearman rank correlation coefficient/level of significance for firms (F) and industries (I). The empirical results confirmed the postulated relationships.

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Comments

Portland State University. Systems Science Ph. D. Program.

Persistent Identifier

http://archives.pdx.edu/ds/psu/4586

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