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Market environment and valuation of invested capital in food manufacturing and distribution industries

Author

Listed:
  • Olive Chiboola

    (Loans and Investments Department, Ministry of Finance, Zambia)

  • Bruce Bjornson

    (200 Mumford Hall, University of Missouri, Columbia, MO 65211)

Abstract

Evolving food preferences and business cycles have had differential impacts on the expected performance, risk, and cost of capital among post farm gate food industries. Expected returns to invested capital in 10 food manufacturing and four distribution industries are evaluated with respect to each industry's risk-based cost of capital. In spite of increasing food market share to food service and increasing retailer concentration and bargaining power, capital in distribution industries has been overvalued so that expected returns have been depressed below the cost of capital for extended periods from 1973 to 1992, while manufacturing capital has been efficiently valued. © 1996 John Wiley & Sons, Inc.

Suggested Citation

  • Olive Chiboola & Bruce Bjornson, 1996. "Market environment and valuation of invested capital in food manufacturing and distribution industries," Agribusiness, John Wiley & Sons, Ltd., vol. 12(2), pages 135-146.
    • Handle: RePEc:wly:agribz:v:12:y:1996:i:2:p:135-146
    DOI: 10.1002/(SICI)1520-6297(199603/04)12:2<135::AID-AGR3>3.0.CO;2-3
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    References listed on IDEAS

    as
    1. Fama, Eugene F. & French, Kenneth R., 1989. "Business conditions and expected returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 25(1), pages 23-49, November.
    2. Chen, Nai-Fu, 1991. "Financial Investment Opportunities and the Macroeconomy," Journal of Finance, American Finance Association, vol. 46(2), pages 529-554, June.
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    Cited by:

    1. Qinrong Wu & Bruce Bjornson, 1996. "Value of advertising by food manufacturers as investment in intangible capital," Agribusiness, John Wiley & Sons, Ltd., vol. 12(2), pages 147-156.

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