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Convergence processes of profitability and company growth
Rajdl, Josef ; Mařík, Miloš (advisor) ; Hindls, Richard (referee) ; Kodera, Jan (referee)
In this dissertation thesis I analyzed the convergence of the profitability and growth of Czech companies in order to improve the business valuation process. In the first part of this thesis the present theoretical and empirical research of the convergence are described. The main goal was to find facts that prove or disprove the existence of the convergence processes. Another goal was to judge existing income valuation models that use convergence approaches. The second part of my thesis is focused on the empirical studies of growth and profitability. The purpose of this part was to identify the problems (so that they could be avoided in my research), to determine the direction of my research and to find tools that should be useful for the analysis. Simultaneously I tried to find evidence to support or to refute the certain patterns of the development of profitability and growth, such as random process, stability or convergence. Briefly summarized, convergence processes are supported in general and also in specific economic theory, because they result from the existence of the competitive advantages that are necessary to renew. However, empirical studies are focused only on foreign markets and their results differ, mainly in various regions, industrial branches and in time. There is no such analysis compiled for the Czech market, so I deal with the convergence of the profitability and of the growth of Czech companies in the third part of my dissertation thesis. Both characteristics are tested using the panel data and also the time-series of the individual companies. Panel data are tested in order to determine distribution of the dynamics of the profitability and of the growth. At the same time related phenomena, which cohere with some patterns of the development of the observed characteristics, are searched -- such as random process or persistence of profitability and growth. In the tests of the individual time-series I try to identify the patterns of progress of profitability and growth. In this part of thesis I used several tools of the mathematical statistics. From outcomes recommendations for the business valuation were suggested. The process of the elimination of the highest level of the profitability and growth is fast. The research confirms that the individual growth and profitability of most of the companies is random. Certain indications of persistence of the profitability were found in the case of relevant number of companies in the medium period, but not in long term. The persistence of the growth is rare not only in long period but also in the medium period. From the results of this thesis that can be highlighted, it was proven that the models based on convergence process can be used only in the case of subjects that achieve stable and high level of the profitability. If there is indicated the random process of the profitability in majority of subjects and if there is possible the convergence by the oscillation, the unsuitable application of the convergence process will lead to great mistake.
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