Relative Pricing of Publicly Traded U.S. Electric Utility Companies

Relative Pricing of Publicly Traded U.S. Electric Utility Company Securities by Nicholas Stephen Jewczyn MBA, New York Institute of Technology, 2008 BS, Southern Illinois University at Carbondale, 1984 Dissertation Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy Management Walden University August 2013 Abstract In the financial turmoil of 2008, U.S. firms reported debt-ratios that differed from the debt-ratios calculated from balance sheets. The problem is that investors bought common stock expecting initial investment return and lost money when companies delisted. The purpose of this quantitative study was to determine sample securities pricing with the application of synthetic assets and debt accrued. Addressed in the research questions wasIn the financial turmoil of 2008, U.S. firms reported debt-ratios that differed from the debt-ratios calculated from balance sheets. The problem is that investors bought common stock expecting initial investment return and lost money when companies delisted. The purpose of this quantitative study was to determine sample securities pricing with the application of synthetic assets and debt accrued. Addressed in the research questions was whether those securities were (a) underpriced compared with return-on-assets (ROA), (b) overpriced compared with ROA, (c) a debt-ratio higher than 60% and also overpriced, (d) underpriced with a synthetic asset added, or (e) related by relative pricing to variant pricing and market capitalization. The study’s base theory was Pan’s efficient market hypothesis (EMH) of security price prediction of market prices versus model prices. The data from the financial statements of 16 publicly traded U.S. electric utility companies were analyzed via correlations and multiple regression analyses to determine securities pricing and suitability. The findings from the analyses of the sample’s variables of market price, book value, market-to-book, and study constructed variables from those variable data were statistically significant. The alternate hypotheses were accepted for all 5 research questions since the analytical operationalization of the hypothetical constructs led to significant relationships. Results suggest that the use of more pricing determinants in securities evaluation may lead to investors losing less money and earning the expected returns for a more efficient capital market, leading to a stronger economy and macroeconomic stability. Relative Pricing of Publicly Traded U.S. Electric Utility Companies by Nicholas Stephen Jewczyn MBA, New York Institute of Technology, 2008 BS, Southern Illinois University at Carbondale, 1984 Dissertation Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy Management – Financial Economics (Self-Designed) Walden University August 2013 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code ProQuest LLC. 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, MI 48106 1346 UMI 3594929 Published by ProQuest LLC (2013). Copyright in the Dissertation held by the Author. UMI Number: 3594929 Dedication My dissertation work is dedicated to the Great Geometer of the Universe and to my fraternal brothers, my family, and my friends who supported me from the beginning. This capstone achievement would not have been possible without the divine inspiration necessary to proceed because the super-conscious has always provided speedy solutions to difficulties posed; my belief in the Great Geometer and my travel East never faltered. I want to thank my mother Anastasia Shamro Jewczyn for pushing me hard in the academics of my formative years where a great relish for learning was fostered and then was meticulously grown. I would like to thank all of my mentors, peers, colleagues, and friends for their unshakable belief in my ultimate and unfettered success. There were many who have been included in that just mentioned group, but I would particularly like to thank my colleague and long-time friend Dr. Karl Senawi for his incredible zeal in learning, Mr. J. Mark Crews for his practitioner-based advice from the Field of Finance, the Rosemark Council #131 Illustrious Master Br. Fred Howard for my perspective relating to humanity and the Great Geometer, and Editor-in-Chief Dr. Marty Ludlum who got me started publishing in a variety of peer-reviewed, Cabell’s-rated journals. I also want to thank my wife Cynthia Louise Jewczyn of many years, with whom I share in the delight of two children and two grandchildren, for being a true partner making my life worth living and for not giving up on me during this arduous and lengthy process. Without the work that was started by my mother, prayerfully advanced by my wife, and cemented by my dissertation committee, this work result would not have been possible. Acknowledgments I would like to thank the faculty and support staff below for their extraordinary help in positioning me to achieve these most excellent academic results: Dr. Mohammad Sharifzadeh, Committee Chair and Methodology Expert, who as my mentor was expeditious in moving my Knowledge Area Module (KAM) demonstrations, which were upper-tier Bloom’s Taxonomy individual 125-page written, critical analyses of a subject area’s base theory, current literature, and a resultant theoretical application construct, forward to completion and who as my chair was instrumental in helping me to develop my dissertation with noteworthy revisions. Dr. Mohammad, you are certainly “one-in-a-million. ” Dr. Robert Aubey, Committee Member and Content Expert, I appreciate your expeditious revisions and dedication during the dissertation review process. Dr. William Brent, University Research Reviewer, your feedback and help during my dissertation process was greatly appreciated. Sarah Matthey from the Research and Writing Center for form and style edits. Thank you! “Completing this work with zeal was the only option. ”