The total set of industries from Value Line is used to demonstrate that business risk and return are negatively correlated across companies within industries. Some empirical questions about industries themselves are also raised. The concepts of income smoothing and corporate strategy are utilized to explain this apparent paradox. Further work is both suggested and elaborated.
While doing some earlier work on the problems of corporate strategy within several industries it appeared that firms which were less successful and less profitable within the industries had higher variances in their operations and in their profits. Conversely, the more profitable firms seemed to have less variance over time in their profitability. Because at least on the surface this appeā¦
The total set of industries from Value Line is used to demonstrate that business risk and return are negatively correlated across companies within industries. Some empirical questions about industries themselves are also raised. The concepts of income smoothing and corporate strategy are utilized to explain this apparent paradox. Further work is both suggested and elaborated.