Speculative and pure risks: Their impact on firms' earnings per share

• Main Authors: Ferrer, Rodiel C., Mallari, Nemia C.
• Format: text
• Published: Animo Repository 2011
• Subjects: Risk management; Earnings per share; Accounting; Business Administration, Management, and Operations
• Online Access: https://animorepository.dlsu.edu.ph/faculty_research/5269
• Institution: De La Salle University

A fast and growing management approach which is currently gaining confidence from the managers is Enterprise Risk Management (ERM). Risk is an investor’s uncertainty about the economic gains or losses that will result from particular investment.(Hitt, 2006). Returns are often measured in terms of accounting figures such as return on assets, return on equity or return on sales. Returns can also be measured on the basis of stock market returns such as monthly returns (the end of the period stock price minus the beginning stock price divided by the beginning stock price, yielding a percentage return). Earnings per share is another means to gauge performance. Reduction in costs, expenses and losses increases income thereby creating value for the investors. More investors would mean more employment generation and growth perspective at the Bataan Economic Zone. This study investigated risk exposures such as speculative and pure risks and their impact on firms’ earnings per share. The venue was Bataan Economic Zone in the Philippines comprising of 38 companies or 100% locators as survey participants, all manufacturing firms. The companies were moderately exposed in terms of speculative risks namely output and input commodity price risk, foreign exchange risk, interest rate risk, and credit risk and rarely exposed to pure risks covering physical assets, human resource, legal liabilities and work related injuries.