Does the Law of Diminishing Return Drive Down Return on Equity Investments?

The Impact of Dieselgate on the Required Rate of Return on Equity of VW, BMW and Daimler

e-Finanse ◽

10.2478/fiqf-2021-0002 ◽

2021 ◽

Vol 17 (1) ◽

pp. 8-18

Author(s):

Romana Čižinská ◽

Pavlína Matějková ◽

Pavel Neset

Keyword(s):

Risk Premium ◽

Inverse Function ◽

Rate Of Return ◽

Deep Dive ◽

Return On Equity ◽

Market Beta ◽

Beta Coefficient ◽

Clean Air ◽

Equity Investments ◽

The Impact

Abstract Our paper studies the impacts of the Dieselgate scandal on the required rate of return on equity investments into VW, Daimler, and BMW. The object of investigation is the beta coefficient that determines the risk premium in the Capital Asset Pricing Model (CAPM). Our research takes a deep dive into the developments from the turning point of the scandal (the EPA NOTICE 2015) on September 18, 2015 – when a Notice of Violation of the Clean Air Act was issued to Volkswagen by the EPA – to the end of February 2016. This period also covers FORMAL COMMENCEMENT 2016, when the U.S. Department of Justice first sued Volkswagen on behalf of the EPA. The spillover (contagion) effect of fraudulent practices of VW impacted BMW, Daimler and other companies in the industry that share a similar business model and market segment. Our research of historical market betas has not confirmed the expectation that in the context of the Dieselgate scandal the return required on equity investments into VW, Daimler, and BMW would soar. The Dieselgate scandal proves that the reliability of beta estimates is an inverse function of market volatility. Historical market beta is, therefore, not a good estimate of the required rate of return for the companies in question.

Download Full-text

Ethical Challenges: Less About Moral Wrongdoing and More About Communication Breakdown

Perspectives on Gerontology ◽

10.1044/gero20.3.72 ◽

2015 ◽

Vol 20 (3) ◽

pp. 72-84 ◽

Cited By ~ 2

Author(s):

Paula Leslie ◽

Mary Casper

Keyword(s):

Ethical Challenges ◽

Speech Language Pathology ◽

Thickened Liquids ◽

Communication Breakdown ◽

Professional Duty ◽

Language Pathology ◽

The Law ◽

Personal Case

“My patient refuses thickened liquids, should I discharge them from my caseload?” A version of this question appears at least weekly on the American Speech-Language-Hearing Association's Community pages. People talk of respecting the patient's right to be non-compliant with speech-language pathology recommendations. We challenge use of the word “respect” and calling a patient “non-compliant” in the same sentence: does use of the latter term preclude the former? In this article we will share our reflections on why we are interested in these so called “ethical challenges” from a personal case level to what our professional duty requires of us. Our proposal is that the problems that we encounter are less to do with ethical or moral puzzles and usually due to inadequate communication. We will outline resources that clinicians may use to support their work from what seems to be a straightforward case to those that are mired in complexity. And we will tackle fears and facts regarding litigation and the law.

Download Full-text