The Research Of The A-share Industry Premium Based On RIM Model

In 2008, a strategy report from Orient Securities showed that:Since 2005, tremendous changes for the industry distribution had happened in the Chinese A-share market. The financial sector,as a represented of services industry had a significant increase in market share, at the same time, the substantial proportion of the market value for industrial enterprises had reduced. Terms from the margins, from the first quarter of 2007, the iron and steel industry, as a represented of the industrial enterprises had a net profit a sharp decline, while the net profit growth for the financial sector which represented the service sector had maintained a rapid growth momentum. Which note that, no matter the source of such changes in the market value was form the listed of new companies or the profits accumulated of the original listed companies, both show that in terms of an IPO in the market or the companies're-investment of net profit, the inflow of the social funds is from the low-income sectors to the high-yield sector. The flows had brought tremendous changes in distribution industries for the A-share market.This paper found that in a industry, the profitability changes are similar for most years and for most enterprises except few individual that profitability are very different as a result of operating risks. Which reflect the effect of the business environment, business characteristics and the industry risk to the industry. The profitability of various industries display very different. so this paper study some selected companies in a industry and treat this industry as the object of study.With a new concept of premium of industry as a measure for the overall ability of the value creation for shareholder, the main features of this article ware based on the concept of enterprise valuation, applying the residual income model and using the opened financial data form the Chinese A-share market to estimate the premium level of industry which was based on these historical data and some assumptions of certain profitability. At the same time, we had contrasted the profitability of value creation for four industries which ware randomly selected from the first,second and third industry. By contrast, we found that if the residual income is greater than zero, which means that the profitability is greater than the requirements of the shareholders, the investment of the industry is increasing. And otherwise it is very difficult that there will be new investment in this industry. which reflects the profit-driven of the social capital. And then gets a standard that the social capital derived from low-profit industries to high-profit industry. According to equilibrium theory of competition, when this flow come to balance, the layout of the industry come to format a whole economy. Through the calculation of this paper, also shows that the entire A-share companies have investment value, the analysis and conclusions in this article bring us the thought that the national economy is not necessarily distributed by the flow of funds profits. the market is not omnipotent, the state and the government should lead or subsidize the poor profit industries which is indispensable in the national economy...