Researching the Attractiveness of Investing in the Danish Construction Industry

Jóannes Arnsteinsson Prestá

Student thesis: Master thesis

Abstract

The notorious cyclical nature of the construction industry makes it an intriguing area of research. During economic recessions, margins are tight as companies bid for a scarce number of projects, while economic expansions lead to more flexible boundaries. The purpose of this thesis is to explore if contractor companies are able to take advantage of economic expansions in order to compensate for the performance during recessions and thereby provide an attractive investment opportunity. The empirical results will be estimated based on 15 years of historical data on listed Danish contractor companies. One Swedish company was added to the analysis to add another aspect. Various risk-adjusted performance measures will be used to enable an assessment of the attractiveness investing in the contractor companies. The results suggest that the Danish companies fail to provide a valid investment opportunity while the Swedish company is able to beat the market. The quantitative results are complemented by an industry analysis that explores which factors are influencing the contractor sector. The main obstacles for the Danish companies are rigid regulations and a high cost of construction. These factors decrease the competitiveness of the sector as well as limiting the efficiency. The future for the industry is however encouraging as there are found persuasive reasons for optimism within the industry.

EducationsMSc in Finance and Investments, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2018
Number of pages84
SupervisorsCaspar Rose