Research On The Approach Of Estimating Invested Project’s Systematic Risk Based On Accounting Information

Systematic risk is the most important dependent variable of the invested project’s cost of capital. While project as the unimplemented event, the systematic risk cannot be estimated directly. Thus researches focus on estimating the systematic risk of invested projects. The CAPM proposed by Sharp(1964) suggested the systematic risk can be measured by β, it is the volatility of the stock market return relative to the market return, the model laid the theoretical foundation for estimating the systematic risk. According to the source of information, the approach of estimating invested project’s systematic risk can be divided into three categories: empirical method;the method based on market information(including CAPM and BAPM methods);the method based on accounting information. Empirical method is lack of theoretical basis, because it is mainly based on subjective judgments of decision makers. CAPM is based on the premise of effective stock market, but the market is not effective, the method is no longer applicable. BAPM excludes the noise trader risk by building dynamic volume index. At present, scholars have been studied to estimate the systematic risk of invested projects and the cost of capital based on BAPM. The method based on accounting information can avoid the effects of noise trader risk, it also can provide an approach to estimate the systematic risk.for whose company is not listed, and make up for the inadequacy of market information method, and expand the application fields of accounting information.However, the method based on accounting information used in textbooks or literatures have some problems, such as the measurement parameter combinations are not clear, the index of accounting yield is inconsistent, and the accounting analysis is not explained.Aim to select proper measurement parameters, this paper lighted up by the research of the measurement parameter selection based on market information,and combined with the characteristics of the market and accounting information, finally figured out the "Hu Shen 300", "9 years", "quarterly returns" should be the most efficitive parameters. Aim to get the correct accounting yield, the paper analyses the difference of ROE, ROA and ROIC firstly, and ultimately chooses ROIC for the proper accounting yield used to estimating the systematic risk of invested project, because ROIC means the return on invested capital of business activities.Secondly, the paper combined the latest financial statements, provide the method for adjusting the balance sheet and income statement.At last, this paper integrates metering parameters determined, adjusting the financial statements, to derive the approach of estimating invested project’s systematic risk based on the accounting information, and show it by logical chart. Applied of this method through example, and comparing the example results with the results that regressed by the "ROIC" that given by financial database and the market rate of return, to verify the validity of this method.In all, this study identifies the appropriate accounting yield and parameters, and provides the method to adjust the financial statements in order to calculate the accurate ROIC, makes the method based on accouting information from theoretical framework into a useful and practical method, to support the project investment decision makers and non-listed companies managers, thus improving their decisions’ quality.