Distill Analytics
A New Alternative Data Edge

Blog

From the Still

Who's behind the Corporate Wheel?

A Canadian Automotive Sector Case Study

In trying to forecast the outcome of a car rally race, many factors that ultimately contribute to the success of a winning team ought to be considered: Weather conditions, navigation routes, the car’s capabilities and, of course, the driver’s skill level. The same is true in the business world. The success of a corporation depends not only on the macroeconomic conditions, the product, and the product demand, but also on the competence of an executive management team. However, for investors, modeling corporate leadership has been historically challenging.

Consider trying to pick the winner in a race between two public Canadian auto parts manufacturers: Linamar Corp and Martinrea International. In early 2013, Canadian media reported favorable macroeconomic conditions for the Canadian auto-parts manufacturing sector. With this, we know the weather report for the race is good and the roads look clear for both competitors. Does the data on their leadership teams help us distinguish which company outmaneuvered the competition?

Distill Analytics conducted a case study on the corporate leaders of these two auto-parts manufacturers using on quarterly earnings call transcripts from 2008 to 2016. The results provide Management Fundamentals Data, revealing each respective team’s alignment to business value creation, its internal political stability, and its strategic capacity. To limit bias, information such as dates and the names of the companies were withheld from the analysts while the study was being conducted.

Prior to 2011, the Management Fundamentals Data for Martinrea looked the more positive of the two companies. Then, in the two-year period of 2010 and 2011, the profiles of both company’s executive teams changed. Linamar entered a high-performance profile, which it has maintained through to the latest available quarter In the same time period, Martinrea’s score decreased and has not recovered.

What has company performance looked like in the same period of time? Linamar Corp. has seen a major jump in share price, while Martinrea International has remained relatively flat.

Contact us to find out more details about this analysis, our metrics, and what Distill Analytics can do for you. Distill’s methods were developed in academia and validated for use in political and military settings. We provide an additional perspective for those seeking to understand the whole picture.  

 

Ryan Cross