Unternehmertum und Organisationsmanagement

Accounting Beta as a Risk-Mapping Criterion: The Casablanca Stock Trade-off as an Example

Abstract

Mohammed Faiteh

To the development of organisations, the issue of calculating the cost of equity is essential. It is a crucial tool for figuring out value production. For assessing the cost of equity, a number of models have been presented in the financial literature, such as the capital asset pricing model (CAPM). This paradigm, however, is only applicable to publicly traded businesses; it is inapplicable to privately held businesses. Alternative measurements of the cost of equity have arisen to address this issue, including accounting beta. This study's major goal was to examine the correlation between market beta and accounting beta, which was computed using ROA, ROE, and net income, in order to show how accounting beta may be used to gauge risk for privately held businesses. This study was conducted using information from a Selection of 49 firms that were listed between 2015 and 2019 on the Casablanca Stock Exchange. The research hypotheses were empirically tested using panel data econometrics. The findings demonstrate that calculating accounting beta using ROA and ROE well approximates market beta and provides a workable method for estimating the cost of equity for unlisted companies. The study's findings add to the body of knowledge on the cost of capital by highlighting the importance of accounting beta in calculating the cost of equity and, consequently, the creation of value for the business.