Hostname: page-component-848d4c4894-r5zm4 Total loading time: 0 Render date: 2024-06-14T18:21:49.324Z Has data issue: false hasContentIssue false
  • English
  • Français

Equity Rates of Return in the UK — Evidence From Panel Data*

Published online by Cambridge University Press:  17 August 2016

Colin Mayer  and
Shirley Meadowcroft
Get access

Extract

There are few issues in the economics of the firm that have generated as much controversy and discussion as the measurement of profitability. Accountants remain sharply divided about the appropriate techniques for adjusting for inflation while in the background economists question the fundamental principles of accounting and fail to agree on whether informative indicators can be constructed at all (see Kay (1976), Fisher and McGowan (1983), Harcourt (1965), Kay and Mayer (1984) for a taste of this debate). Much of this discussion has been highly misconceived and it is a basic contention of this paper, as described in section I, that accounting figures are indeed relevant for answering a range of economically interesting questions and a desirable method of adjusting for inflation is both well defined and simple to apply in practice.

Type
Part Four: Measurement of Capital Utilisation and Rates of Return
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 50 , Issue 3-4 , 1984 , pp. 363 - 398
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1984 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

(*)

This paper is part of an Institute for Fiscal Studies project on Fiscal Policy in the Corporate Sector. The project is financed by the E.S.R.C. and the Esmee Fairbairn Charitable Trust.

(**)

Colin Mayer is a Fellow of St. Anne’s College, Oxford and a Research Associate of the I.F.S.. Shirley Meadowcroft is a Research Officer at the I.F.S., 180/182 Tottenham, Court Road, London W1P 9LF.

References

Auerbach, A.J. (1979), Wealth maximization and the cost of capital, Quarterly Journal of Economics, 93, 433–446 Google Scholar
Bradford, D.F. (1981), The incidence and allocation effects of a tax on corporate distributions, Journal of Public Economics, 15, 1–22.Google Scholar
Bray, F.S. and Sheasby, H.B. (1949), The design of accounts, Gregg, London.Google Scholar
Edwards, J.S.S. and Keen, M.J. (1984a), Inflation and non-neutralities in the taxation of corporate source income, mimeo.Google Scholar
Edwards, J.S.S. and Keen, M.J. (1984b), Taxes, investment and q, mimeo.Google Scholar
Edwards, J.S.S. and Mayer, C.P. (1983), Issues in Bank Taxation, Institute for Fiscal Studies, London.Google Scholar
Feldstein, M.S. (1980a), Inflation and the stock market, American Economic Review, 70, 839–847.Google Scholar
Feldstein, M.S. (1980b), Inflation, tax rules and the stock market, Journal of Monetary Economics, 6, 309–331.Google Scholar
Feldstein, M.S. and Summers, L.M. (1977), Is the rate of profit falling? Brookings Papers on Economics Activity, I, 211–228.Google Scholar
Fisher, F.M. and McGowan, L.M. (1983), On the misuse of accounting rates of return to infer monopoly profits, American Economic Review, 73, 82–97.Google Scholar
Flemming, J.S. Price, L.D.D. and Ingram, D.H.A. (1976), Trends in company profitability, Bank of England Quarterly Bulletin, 16, 36–52.Google Scholar
Griffin, T. (1976), The stock of fixed assets in the United Kingdom: How to make best use of the statistics, Economic Trends, 276, 130–143.Google Scholar
Harcourt, G.C. (1965), The accountant in a golden age, Oxford Economic Papers, 17, 66–80.Google Scholar
Hendershoot, P.H. (1981), The decline in aggregate share values: Taxation, valuation errors, risk and profitability, American Economic Review, 71, 909–922.Google Scholar
Hicks, J.R. (1939), Value and capital, Oxford University Press, Oxford.Google Scholar
Hill, T.P. (1979), Profits and rates of return, OECD, Paris.Google Scholar
Holland, D.M. and Mayers, S.C. (1979), Trends in corporate profitability and capital costs, in The nation’s capital needs: There studies, ed. Lindsay, R., Committee for Economic Development, New York.Google Scholar
Kay, J.A. (1976), Accountants too could be happy in a Golden Age: The accountant’s rate of profit and the internal rate of return, Oxford Economic Papers, 28, 447–460.Google Scholar
Kay, J.A. (1977), Inflation accounting – a review article, Economic Journal, 87, 300–311.Google Scholar
Kay, J.A. and Mayer, C.P. (1984), On the application of accounting rates of return, IFS working paper, 49.Google Scholar
King, M.A. (1975), The United Kingdom profits crisis: myth or reality: Economic Journal, 85, 33–54.Google Scholar
King, M.A. (1977), Public policy and the corporation. Chapman and Hall, London.Google Scholar
Mayer, C.P. (1982a), A program for inflation adjusting published accounts, IFS working paper, 31.Google Scholar
Mayer, C.P. (1982b), The structure of corporation tax in the U.K., Fiscal Studies, 3, 121–141.Google Scholar
Mayer, C.P. and Morris, C.N. (1982), A disaggregated model of U.K. corporation tax, IFS working paper, 34.Google Scholar
Meadowcroft, S. (1983), The IFS inflation accounting model, mimeo. Poterba, J.M. and Summers, L.H. (1983), Dividend taxes, corporate investment, and «Q», Journal of Public Economics, 22, 135–167.Google Scholar
Williams, N.P. (1981), Influence on the profitability of twenty-two industrial sectors, Bank of England Dsicussion Paper, 15.Google Scholar