PurposeConstruction businesses are perceived uncertainly by investors, and are generally assumed to represent more risk than other businesses. Added to this is the perception of poor business management practices being adopted by construction companies, sometimes resulting in business‐failure. Fluctuations in construction workload contribute to investor anxiety. In this light, the paper aims to present a study of the comparative management efficiency performance of construction companies.Design/methodology/approachPublicly listed Australian construction companies over the ten‐year period 1998‐2007 are examined. Performance is compared with a select number of “blue chip” companies as a benchmark. In total, 19 management efficiency measures are used including asset management ratios, debt and safety ratios, and cash flow ratios. The construction companies used in the study engage in work covering the full range of construction activities.FindingsThe results indicate that construction companies perform as well as, and in some cases better than, other businesses, dispelling some of the misconceptions about construction businesses.Originality/valueThe paper's finding will be useful to those investing in the construction industry, and will lead to a better public perception of construction businesses.
Understanding the performance of publicly listed Australian construction companies, in comparison with other Australian listed companies, is vital to the construction sector’s continuous access to capital from the public equity market. Evidence on the performance of construction companies that do business in building and/or civil infrastructure is presented and compared with the Australian All Ordinaries Index and a portfolio of publicly listed (blue chip) companies. Using fundamental analysis, a comprehensive assessment on a range of financial and performance indicators is provided (including share prices, equity valuation multiples and profitability ratios) over the 10‐year period, 1998 to 2007. The results show that, apart from the period when the Goods and Services Tax was introduced in 2000, the performance of publicly listed Australian construction companies in most of the indicators assessed is comparable to the largest traded shares on the Australian Securities Exchange. The empirical evidence is encouraging and could potentially elicit interest and confidence for investors to invest in construction companies.Financial ratios, company performance, market performance,
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