Showing papers on "Market capitalization published in 1977"

Share Capitalization Changes, Information, And the Australian Equity Market:

Abstract: Bonus issues, share splits and rights issues are studied in a replication and extension of the classic Fama, Fisher, Jensen and Roll study. On the Melbourne exchange, each category on average is as...

The Role of the Stock Market

Abstract: The major socio-economic role of a stock exchange is the valuing of securities and the provision of a well-run market-place where investors can buy and sell shares. The ‘proper’ valuation of securities is important as it provides signals for the allocation of scarce capital resources. Thus investment funds are channelled towards those companies which can use them most profitably (and, from the viewpoint of a capitalist economy, most usefully). The provision of a well-run market-place — along with accurate pricing — is required if individuals are going to invest in private enterprise, either via some investment institution, for example a unit trust, or on their own. If the market is not well run and securities are incorrectly priced, then many individuals will stop investing and this will seriously reduce the availability of funds to expanding companies.

Multinationality and stock market valuation: an empirical study of u.s. markets and companies

Abstract: It should be noted that this growth in overseas profits took place in spite of increasing nationalism in host countries leading to restrictions on overseas operations and increasing uncertainty in world financial markets especially in the seventies. The rewards of going overseas or the penalties of not going overseas must have been more than the difficulties encountered. The reasons for undertaking foreign direct investment are numerous2, and for some companies they certainly include the need to go overseas to stay competitive in the U.S. Whatever the reasons for a particular company, more and more companies must and are becoming multinational while companies that are already multinational are not likely to reduce their overseas involvement significantly. The purpose of this paper is to examine if on the average U.S. investors reward U.S. companies for going overseas. It has traditionally been assumed that a multinational company (MNC) should have a higher Price/Earnings (P/E) ratio than a comparable company that is purely domestic because of the opportunity for international risk diversification offered to investors by MNCs. While recent results of Solnik and others support that hypothesis3, the conclusions drawn by Adler and some others question the optimality of companies diversifying internationally as contrasted to such diversification by investors themselves.4 This paper attempts to provide empirical evidence regarding the stock market valuation of multinationality. The overseas involvement of U.S.-based multinational companies as measured by the percentage of foreign sales, foreign income, and foreign assets are related to the company's cost of equity capital, systematic risk, P/E ratio, and other variables. In the first part of the paper, some of the issues relevant to determining the optimality of international diversification by U.S. multinationals are discussed in view of other investment opportunities available to U.S. investors. Next, the results of other related empirical studies are examined as to U.S. investor reaction to multinationality among U.S. companies, as well as where this study fits in. The second part of this paper details the data