Showing papers on "Market capitalization published in 2001"

Institutional Investors and Equity Prices

Abstract: We analyze institutional investors' preferences for stocks and the implications that these preferences have for stock-market prices and returns. We find that -- a category including all managers with greater than $100 million under discretionary control -- have nearly doubled their share of the common-stock market from 1980 to 1996 most of this increase driven by the growth in holdings of the largest one-hundred institutions. Large institutions, when compared with other investors, prefer stocks that have greater market capitalizations, are more liquid, and have higher book-to-market ratios and lower returns for the previous year. We discuss how institutional preferences, when combined with the rising share of the market held by institutions, induce changes in the relative prices and returns of large stocks and small stocks. We provide evidence to support the in-sample implications for prices and realized returns and we derive out-of-sample predictions for expected returns.

Financial Development and Economic Growth: The Role of Stock Markets

Abstract: Utilizing time series methods and data from five developed economies, we examine the relationship between stock market development and economic growth, controlling for the effects of the banking system and stock market volatility. Our results support the view that, although both banks and stock markets may be able to promote economic growth, the erects of the former are more powerful. They also suggest that the contribution of stock markets on economic growth may have been exaggerated by studies that utilize cross-country growth regressions.

Excessive Extrapolation and the Allocation of 401(k) Accounts to Company Stock

Abstract: About a third of the assets in large retirement savings plans are invested in company stock, and about a quarter of the discretionary contributions are invested in company stock. From a diversification perspective, this is a dubious strategy. This paper explores the role of excessive extrapolation in employees’ company stock holdings. I find that employees of firms that experienced the worst stock performance over the last 10 years allocate 10.37 percent of their discretionary contributions to company stock, whereas employees whose firms experienced the best stock performance allocate 39.70 percent. Allocations to company stock, however, do not predict future performance. ROUGHLY A THIRD OF THE ASSETS in large retirement savings plans are invested in company stock ~i.e., stocks issued by the employing firm! .I n extreme cases, such as Coca-Cola, the allocation to company stock reaches 90 percent of the plan assets. From a diversification perspective, it is even more puzzling that Coca-Cola employees allocate 76 percent of their own discretionary contributions to Coca-Cola shares. This strategy seems dubious, and it is in complete contrast to Markowitz ~1952! and Sharpe ~1964!, who predict that people will hold well-diversified portfolios. This paper examines whether excessive extrapolation of past returns could explain at least part of the discretionary allocations to company stock. 1 The empirical analysis utilizes a unique database of SEC filings that describes the variation in investment elections across companies for 1993. There are at least two reasons why the allocation to company stock is an interesting topic to study. First, the costs of insufficient diversification can be substantial. For example, with the assumption of a constant relative risk aversion of two, Brennan and Torous ~1999! find that the certainty equivalent of investing one dollar in a single stock over a 10-year period is only 36 cents! In the case of company stock, the costs of insufficient diversification

The Corporate Governance Behavior and Market Value of Russian Firms

Abstract: I examine the relationship between corporate governance behavior and market value for a sample of 21 Russian firms. I use (1) fall 1999 corporate governance rankings for these firms, developed by a Russian investment bank, and (2) the "value ratio" of actual market capitalization to potential Western market capitalization for these firms, determined independently by a second Russian investment bank. The correlation between ln(value ratio) and governance ranking is striking and statistically strong: Pearson r = 0.90 (t = 8.97). A worst (51 ranking) to best (7 ranking) governance improvement predicts a 700-fold increase in firm value. These results are tentative because of the small sample. But they suggest that corporate governance behavior has a powerful effect on market value in a country where legal and cultural constraints on corporate behavior are weak. This paper is a nearly final version of the published article. An earlier conference version of this article, with a smaller 16-firm sample, was published as Bernard Black, "Does Corporate Governance Matter? A Crude Test Using Russian Data", University of Pennsylvania Law Review vol. 149, pp. 2131-2150 (2001), available at http://ssrn.com/abstract_id=252706 A Russian translation of this paper is available at http://ssrn.com/abstract_id=367141

The Debt Maturity Structure of Small Firms

Abstract: Smallfirms differ from large firms in taxability, ownership, flexibility, industry, economies of scale, financial market access, and level of information asymmetry. We investigate the determinants of small firms' choice of the maturity structure of debt. We find that small firms' maturity of assets, capital structure, and probability of default are statistically and economically important in the choice of debt maturity. We find little evidence that smallfirms' growth options, level of asymmetric information, and tax status affect debt maturity choice. Although many studies examine the choice between debt and equity in financing a firm, there has been little research on other features of debt financing, including its maturity structure. In this paper, we present an empirical investigation of the maturity structure of small-firm debt. Our work extends prior empirical research on debt maturity to a new and economically prominent group of firms. But more important are the implications for theory building on debt maturity. Small firms are not larger firms scaled down; they differ in basic respects that influence the choice between short- and long-term debt financing. Investigating small firms' debt maturity choices contributes to our understanding of this choice. There is a substantial difference between what financial research literature calls a "small firm" and what this term means elsewhere. Financial research typically investigates firms with publicly traded equity because many important research questions concern the effect of a firm's decisions on the market value of equity. "Small firms" are usually defined as the group (decile, quartile, or quintile) of publicly traded firms with the smallest sales or market capitalization. However, even the smallest of traded firms is large relative to most of the firms in the economy. Researchers outside finance identify firms as "small" based on their number of employees or sales volume. These are proxies for economies of scale, capital market access, management and ownership structure, and other factors that differentiate between large and small firms (Osteryoung, Pace, and Constand, 1995; Osteryoung and Newman, 1993). One designation for a "small" firm is one with fewer than 500 employees; such firms provide 53% of employment in the US, produce 47% of total sales revenues, comprise over 95% of the total number of firms, and are responsible for most of the employment growth in recent years (USGPO, 1996). The sample firms in our research are much smaller and concentrated in different industries from the larger traded firms studied in prior research on debt maturity. The average sales of the firms in our study are only $3 million per year. Most of our sample firms are retailers or service firms, rather than manufacturers. About one-half are not corporations, and virtually none are publicly traded.

Foreign ownership restrictions and market segmentation in china's stock markets

Abstract: We study market segmentation in China's stock markets, in which local firms issue two classes of shares: class A shares available only to Chinese citizens and class B shares available only to foreign citizens. Significant stock price discounts are documented for class B shares. We find that the price difference is primarily due to illiquid B-share markets. Relatively illiquid B-share stocks have a higher expected return and are priced lower to compensate investors for increased trading costs. However, between the two classes of shares, B-share prices tend to move more closely with market fundamentals than do A-share prices. Therefore, we find A-share premiums rather than B-share discounts in China's markets. JEL classification: G15

Does Corporate Governance Matter? A Crude Test Using Russian Data

Abstract: Does a firm's corporate governance behavior affect its market value? In most empirical tests in developed countries, firm-specific corporate governance actions have little or no effect on market value These weak results could reflect limited variation among firms in governance practices In contrast, the corporate governance practices of Russian firms vary widely, from quite good to awful I test whether corporate governance behavior affects the market value of Russian firms using (1) fall 1999 corporate governance rankings developed by a Russian investment bank for sixteen Russian public companies and (2) the "value ratio" of actual market capitalization to potential Western market capitalization for these firms, determined independently at the same time by a second Russian investment bank The correlation between ln(value ratio) and governance ranking is striking and is statistically strong despite the small sample size: Pearson r = 090 (p For an updated and somewhat more technical version of this Article, using an expanded 21 firm sample, see Bernard Black, "The Corporate Governance Behavior and Market Value of Russian Firms", Emerging Markets Review, Vol 2, pp 89-108 (2001), nearly final version available at http://ssrncom/abstract_id=263014

Struggling to Understand the Stock Market

Abstract: Economists are as perplexed as anyone by the behavior of the stock market. Figure 1 shows a broad measure of stock-market value in relation to GDP from 1947 through 2000. In addition to saw-tooth movements including the contraction in late 2000, the value of the stock market has large, low-frequency swings, moving upward from 1950 to 1965, then downward to 1982, and upward until early 2000. I entertain the hypothesis that these large movements are the result of rational (if not accurate) appraisal of the cash likely to be received by shareholders in the future. The hypothesis receives some support from work by financial economists showing that irrational markets create profit opportunities for active traders and that passive traders consistently earn higher returns. Most of my discussion will be complementary to the work of financial economists—I will look at the fundamentals underlying stock-market values. The lecture considers three potential contributors to the big movements shown in Figure 1:

Macroeconomic influences on the stock market

Abstract: The paper studies the dynamic interactions among indicators of economic activity, such as industrial production, interest rate and exchange rate, the performance of the foreign stock market, oil prices, and stock returns to examine whether economic activity movements affect the performance of the stock market for Greece. The empirical evidence suggests that stock returns do not lead changes in real economic activity while the macroeconomic activity and foreign stock market changes explain only partially stock market movements. Oil price changes explain stock price movements and have a negative impact on macroeconomic activity.

Does corporate governance matter? A crude test using Russian data

Abstract: Does a firm's corporate governance behavior affect its market value? In most empirical tests in developed countries, firm-specific corporate governance actions have little or no effect on market value. These weak results could reflect limited variation amongfirms in governance practices. In contrast, the corporate governance practices of Russian firms vary widely, from quite good to awful. I test whether corporate governance behavior affects the market value of Russian firms using (I) fall 1999 corporate governance rankings developed by a Russian investment bank for sixteen Russian public companies and (2) the "value ratio" of actual market capitalization to potential Western market capitalization for these firms, determined independently at the same time by a second Russian investment bank. The correlation between In(value ratio) and governance ranking is striking and is statistically strong despite the small sample size: Pearson r = 0.90 (p < .0001). A one-standard-deviation improvement in governance ranking predicts an 8-fold increase in firm value; a worst (51 ranking) to best (7 ranking) governance improvement predicts a 600-fold increase in firm value. My results are tentative, due to the small sample size. But they suggest that a firm's corporate governance behavior can have a huge effect on its market value in a country where other constraints on corporate behavior are weak.

Home Production Meets Time to Build

Abstract: An innovation in this paper is to introduce a time‐to‐build technology for the production of market capital into a model with home production. Our main finding is that the two anomalies that have plagued all household production models—the positive correlation between business and household investment, and household investment's leading business investment over the business cycle—are resolved when time to build is added.

What does the performance of the Dow Jones Sustainability Group Index tell us

Abstract: The Dow Jones Sustainability Group Index (DJSGI) is really a family of indexes used to identify and track the performance of sustainably run companies. When the DJSGI was introduced in September 1999, it was claimed to outperform the more generalized Dow Jones Global Index (DJGI) with respect to market capitalization growth. Corporations, NGOs and governmental agencies often refer to the DJSGI for illustrating that integrating economic, environmental and social factors into the operations and management of a company increases shareholder value and business activity transparency. The DJSGI is also used by global corporations to legitimize the efforts they put into sustainability. However, there have been no studies carried out to date that illuminate the business activity transparency of the DJSGI. This study investigates the structure and transparency of the DJSGI compared with the DJGI. The results of this study show that the DJSGI focuses more on the technology sector than the general DJGI does. The average market capitalization value of companies listed in the DJSGI was found to be two-and-a-half times the corresponding average for those listed in the DJGI. This raises some legitimate questions. Does the superior performance of the DJSGI reflect the greater efforts DJSGI companies put into sustainability, or a dependence on asymmetric distributions in company sectors, world regions or market capitalization? This paper therefore endeavours to illustrate the transparency of the DJSGI. Copyright © 2001 John Wiley & Sons, Ltd. and ERP Environment

Investment company that issues a class of conventional shares and a class of exchange-traded shares in the same fund

Abstract: An automated method is provided for administering a single investment company that issues one or more classes of shares that are bought from and redeemed with the single investment company at a net asset value and issues one or more classes of shares that are listed for trading on a securities exchange and that are bought and sold at negotiated market prices. One or more computers maintain account data of the outstanding shares. An owner of any share of any share class has an undivided interest in the single investment company.

Disposition Effect and Firm Size: New Evidence on Individual Investor Trading Activity

Abstract: Economists and investment professionals have long been puzzled by the tendency of individual investors to sell the winners from their stock portfolio and to hold on to the losers. I analyze the daily trading records of 78,000 clients of a discount brokerage house over six years and document, surprisingly, that such behavior (known as the disposition effect) is concentrated primarily in large-cap stocks. Trades in stocks at the bottom 40 percent of the market capitalization distribution exhibit a reverse disposition effect: investors keep their winners and realize their losers. Moreover, the relationship between firm size and the disposition effect appears to be monotonic. The larger the market capitalization of the firm, the more likely people are to realize their gain and to hold on to their loss. This new evidence challenges the current view of the literature that the disposition effect is an implication of a prospect-theory type of individual preferences. I examine different potential explanations for the size dependence of the disposition effect, such as margin calls being triggered more often by the more volatile small stocks, different trading styles in small stocks and large stocks and different behavior with regard to small and large gains and losses. My findings are consistent with a view that individual beliefs rather than preferences are generating the disposition effect.

Opening a Stock Exchange

Abstract: Nearly sixty countries have opened their first national stock exchanges since 1950. I investigate the effects on economic growth of these openings in two ways. First, economic growth histories of at least five years are available for seventeen of these countries. On average, the countries that opened stock markets grew faster than a priori similar countries that did not open exchanges; however, the growth rate of investment was lower in the countries opening exchanges over periods of five and ten years. Second, I use two stage least squares to account for possible endogeneity of the decision to open a stock market. Even controlling for this endogeneity, the estimated correlation between opening a stock exchange and economic growth is positive and statistically significant.

A comparables approach to measuring cashflow‐at‐risk for non‐financial firms

Abstract: Cashflow-at-Risk (C-FaR) is an attempt to create an analogue to Value at Risk (VaR) that can be used by non-financial firms to quantify various kinds of risk exposures, including interest rate, exchange rate, and commodity price risks. There are two basic ways to attack this problem. One is from the “bottom up,” which involves building a detailed model of all of a company's specific exposures. The C-Far approach presented here is a “top-down” method of comparables that looks directly at the ultimate item of interest—the companies' cashflows. The fundamental challenge facing the top-down strategy is that, for any one company, there is not enough data on its own cashflows to make precise statements about the likelihood of rare events. To get around this problem, the authors match a target company with a large set of comparable companies that are expected to have similar cashflow volatility. The comparables are chosen to be close to the target company on four dimensions: (1) market cap; (2) profitability; (3) industry risk; and (4) stock price volatility. C-FaR can be useful to managers addressing a variety of corporate finance decisions. For example, by providing estimates of the probability of financial distress, the C-FaR method can be used in conjunction with capital structure data to help formulate debt-equity tradeoffs in a more precise, quantifiable fashion. It can also be used to evaluate a firm's overall risk management strategy, including the expected benefits of using derivatives to hedge commodity-price exposures or the purchase of insurance policies. Moreover, C-FaR may even have a use in investor relations: by disclosing the results of a comparables-based C-FaR analysis ahead of time, a company may be able to cushion earnings shocks by furnishing investors or analysts with credible, objective estimates of what is likely to happen to their cash flows under different economic scenarios.

The Changing Role of R&D

Abstract: Ten major trends are affecting product development today. Your company's survival is dependent upon its ability to adapt to these new trends and execute its strategy faster than the competition. OVERVIEW: Powerful trends affect product development and the creation of business value today. "Main-Street" companies must improve their profits and "all" companies face aggressive revenue targets. For everyone this means finding new ways to fill the gap between current and projected revenue goals. A company increases its market capitalization by filling this gap, a burden resting predominantly on R&D. R&D has traditionally been focused internally on product development and, to some degree, on mergers and acquisitions. R&D's role must now expand and take on a greater scope to meet the financial goals of the company. This article outlines the trends that are both creating and enabling changes in R&D. Although presented as though they were fixed or inviolate, these trends are in reality unfolding before us. As companies experiment with methods to take advantage of the trends, or thwart their impact, their efforts, at a minimum, distort the environment for everyone. Thus, whether or not these trends are in fact "real" or "inevitable" is not the point. The point is that some companies are reacting to each and every one of the trends discussed, and their behavior distorts and adds to the chaos we all experience. Each of the trends described below has been present to some degree before. But it is the building of, and the confluence of, these trends that is creating extreme opportunities and threats for everyone. Synergy among these trends has created a completely different business environment for companies today. My preparation for Industrial Research Institute national programs afforded the opportunity through personal conversations and access to IRI committee work to analyze the approaches taken by today's companies. I learned that some organizations were managing clusters of these trends, but no company was dealing with and blending the opportunities from all of the trends. The most successful companies will be the ones that face the majority of these trends head on and adopt effective strategies to thrive in this new environment. Patterns Among the Trends Ten major trends affecting R&D today can be segmented into three areas: * New avenues for building corporate value. * New development processes. * Trends that are warping time. The first set of trends encompass new avenues to building corporate value. These include the changing basis of market capitalization, building companies to flip, off-balance-sheet spin-offs and licensing-out as a business practice. These market forces are redefining what value means to a company. The basis of market capitalization is changing from a focus on tangible to intangible assets. Companies are no longer being built solely to withstand the tests of time. Instead, some new companies are being built to flip. Spin-offs are going off the balance sheet and licensing-out is emerging as its own business unit. All of these trends are affecting how a CEO explains value to the company's shareholders and how R&D expenses are explained to the analysts. Second, new development processes afford tremendous opportunity for substantial returns from the new business models. These trends are "spiral" product development, synchronous portfolio selection and management, iterative integration of product development and portfolio management, and connection-focused new product developments. Product development and portfolio selection are moving from conventional funnel models to spiral development. Acquisitions and partnerships are replacing some of R&D's traditional role in bringing new products to the company. These trends are both reducing the time to bring new products to market and adding greatly to the complexity of managing R&D. …

Capitalization and Community Size

Abstract: Studies often show taxes and public services capitalized into house prices, but no one has tested whether the rate of capitalization depends on community size The theoretical model of Hoyt (Regional Science and Urban Economics, 29, 155-171, 1999) predicts that capitalization occurs, but that the rate of capitalization is weaker in large communities Hoyt's model is tested empirically using a house price hedonic framework The tax capitalization results are less clear, but the school quality and crime results firmly support the model's predictions Using both school districts and municipalities to measure communities, larger communities weaken the rate of capitalization

The Valuation of IPO and SEO Firms

Abstract: We examine the pricing of initial public offering (IPO) and seasoned equity offering (SEO) firms using a stochastic frontier methodology. The stochastic frontier framework models the difference between the maximum possible value of the firm and its actual market capitalization at the time of the offering as a function of observable firm characteristics. Using a new data set, we find that commonly-used pricing factors do indeed influence valuation. Ceteris paribus, firms in industries with great earnings potential are more highly valued, and IPO firms are underpriced. Theories regarding underwriter reputation or windows of opportunity for equity issuance are not supported in our empirical results.

Deals That Create Value

Abstract: No doubt the market is skeptical about M&A, but it is a lot more receptive to some kinds of deals than to others. Inquire before you acquire. Half or more of the big mergers, acquisitions, and alliances you read about in the newspapers fail to create significant shareholder value, according to most of the research that McKinsey and others have undertaken into the market's reaction to announcements of major deals. For shareholders, the sad conclusion is that an average corporate-control transaction puts the market capitalization of their company at risk and delivers little or no value in return. Managers could eschew corporate deals altogether. But the right course is to pursue them only when they make sense--in other words, to make sure that all of your deals are above average. Easily said, of course. But what, exactly, does an "above-average" deal look like? We decided to take that question to the stock market. Our study examined the stock price movements, a few days before and after the announcement of a transaction, of companies involved in corporate deals. Using a multivariate linear regression, we tried to explain those movements in terms of several deal variables, such as deal size, industry, and deal type. Our experience with scores of corporate-control transactions has taught us that mergers, acquisitions, and alliances tend to serve some kinds of strategies better than others. A large part of our study therefore involved identifying the strategic purpose behind each deal we followed and making that purpose one of the variables used to describe it. If the market reacted more enthusiastically to deals that embodied a particular strategy, our analysis might expose these underlying trends. Indeed, we found that the market apparently prefers deals that are part of an "expansionist" program, in which a company seeks to boost its market share by consolidating, by moving into new geographic regions, or by adding new distribution channels for existing products and services. The market seems to be less tolerant of "transformative" deals, those that seek to move companies into new lines of business or to remove a chunk of an otherwise healthy business portfolio. Even within a given type of strategy (whether expansionist or transformative), the market seems to prefer certain kinds of transaction to others. In particular, acquisitions create the most market value overall, despite the well-known "winner's curse," in which buyers pay too high a premium. If a deal is structured as a merger or a sale, it has little clear effect on stock prices. Choosing to structure deals as joint ventures or alliances, all else being equal, does not create significant value for the participants and may even destroy some value (exhibit). Finally, if a company competes in a growing or fragmented industry, or if the performance of the company has recently lagged behind that of its peers, some signs indicate that the market may reward its transactions more than those of stronger performers. Managers might find it useful to understand these biases as they consider whether or how to proceed with a deal. One dramatic example of the way the transactions of a company can boost its share price was Heineken's conquest of the European beer market. In the past five years, acquisitions have lifted the company's share price by 12 percent a year, reckoned by the increases that occurred when the deals were announced. In other words, Heineken's acquisition strategy alone generated half of the company's outperformance as compared with the Dutch stock market index for the five-year period. The architecture of a study We started with a sample of 479 corporate deals announced by 36 companies in the telecommunications, petroleum, and European banking industries over a five-year period. Because we wanted our study to account explicitly for the size of a deal, we excluded all transactions whose monetary value had not been announced publicly. …

Competition Among Securities Markets: A Path Dependent Perspective

Abstract: Today, there are an estimated 150 securities exchanges trading stocks around the world. Tomorrow (or at least within the reasonably foreseeable future), this number is likely to shrink radically. The two great forces reshaping the contemporary world - globalization and technology - impact the world of securities markets in a similar and mutually reinforcing fashion: (1) they force local and regional markets into more direct competition with distant international markets; (2) they increase overall market capitalization and lower the cost of equity capital, as issuers are enabled to access multiple markets; and (3) they permit order flow and liquidity to migrate quickly from local markets to international "super-markets," sometimes with adverse consequences for smaller domestic markets. In overview, these consequences follow because globalization has lowered the barriers to cross-border capital flows, including in particular traditional restrictions on foreign investments in domestic stocks, while technology has made instantaneous information flows feasible, thereby enabling electronic securities markets to link dealers and markets participants around the world in continuous world-wide trading.

Predictive accuracy of political stock markets: Empirical evidence from a European perspective

Abstract: In a meta study of 25 political stock markets conducted in Germany in the last decade we analyze their predictive success. Although the predictions of political stock markets are highly correlated with the corresponding polls, the markets are able to aggregate additional information. One explanatory variable for variations in predictive success of the German stock markets relative to the polls is market efficiency. Even though the overall predictions of the political stock markets are quite reliable on the aggregate level we find systematic prediction errors on the contract level that can be attributed to the vote share size and to individual trader biases.

The Asset Allocation of Emerging Market Mutual Funds

Abstract: Benchmark following and portfolio rebalancing effects have often been cited when trying to explain international financial contagion phenomena. Using a dataset containing the country allocation of individual dedicated emerging market equity funds, we assess the relevance of mean-variance optimization and benchmark following, finding strong evidence for both. We also present a framework to systematically extract useful information about market expectations from funds' holdings.

Wipro's Chairman Azim Premji on building a world-class Indian company

Abstract: Executive Overview Azim Premji dropped his studies at Stanford University in 1966 to take over the family business, Wipro, in Bombay, following his father's sudden death. He was only 21, and Wipro was a $5 million company selling consumer products. Today Wipro has a market capitalization of $10 billion and is engaged in several high-tech businesses, notably software services. More than half its sales come from exports, principally to the United States. Wipro's stock now trades on the New Yoric Stock Exchange at a price-earnings multiple of 70 or more. Its customers include several Fortune 500 companies for which it provides software support and R&D services. Wipro was the first company in the world to obtain CMM-Level 5 certification from Carnegie Mellon University's Software Engineering Institute, the highest possible rating for a software development organization. Wipro is also renowned within India as an ethical and professionally managed company. Azim Premji, 55, whose family still owns 84 percent of ...

How to Dominate a Firm With Valuable Control? Dual Class Firms Around the World: Regulation, Security-Voting Structure, and Ownership Patterns

Abstract: Dual-class shares have presented a challenge to standard valuation theories, and yet they make up a significant share of the trading volume and market capitalization in a significant number of the world's largest stock exchanges. This descriptive study overviews the incidence of dual-class firms in the 46 largest national stock markets, and described their voting and cash-flow rights in detail. The security-voting structure (deviations from one share one vote) of dual-class firms is examined in a comparative cross-country perspective - the higher-voting class is noted to concentrate majority or super majority control virtually in all cases. The national regulatory environment for multiple share classes is a hotly-debated topic, on which the study sheds systematic light. Predictably, the ownership of dual class firms is significantly more concentrated than that of their single-class counterparts, and in most cases involves majority voting power and the absence of smaller sizable voting blocks. The bulk of the evidence is consistent with the hypothesis that dominant owners do not prefer to share control. Owners are mostly families, who also participate actively in the management and supervision of the firm.

The Performance of Growth Stocks and Value Stocks in the Pacific Basin

Abstract: Many studies show that value stock strategies outperform growth stock strategies in U.S. markets and in international markets. However, the evidence is not clear as growth stocks have had higher returns in a few countries. Because the behavior of stock markets vary between different geographic regions, it is possible that the performance of these strategies may differ in the Pacific Rim region. We examine the performance of value stocks and growth stocks, defined on the basis of market price to book value per share, over the 10-year period 1986-1996, for six Pacific Rim countries. Based on over 11,900 annual stock returns, value stocks generally outperformed growth stocks over the 10-year period, and in the various Pacific Rim country stock markets. In addition, smaller cap stocks outperformed large cap stocks. Regardless of cap size, however, value stocks, on the whole, outperformed growth stocks. When growth stocks occasionally outperformed value stocks, the margin of difference tended to be small.

International correlations and excess returns in European stock markets: Does EMU matter?

Abstract: The paper analyses the international correlations of the European national stock markets and identifies the potential excess returns which can be reaped by means of international diversification in the emerging European stock market relative to a strategy of purely national diversification both before and after EMU comes into effect. To facilitate a comparison of the pre- and post-EMU effects of international diversification, we construct an EMU index-portfolio as an average of the national stock market indices weighted by the respective national market capitalizations. The performance of the national indices is then compared to the EMU index-portfolio with and without an explicit incorporation of FX volatility. It is found that the excess returns of holding an efficiently diversified European stock market portfolio are positive throughout, with the highest potential for excess returns for Austria, Finland and Italy. However, the results generally indicate that the gains of international diversification a...

Brands : Visions and Values

Abstract: In the past the value of any company lay principally in its tangible assets, such as stock, plant and property. Over recent years this has changed considerably and a large proportion of the market capitalisation of any company is now likely to consist of intangible assets, such as its brand name. The value of names like Coca Cola, Microsoft, BMW and IBM is immense. However, although analysts and accountants are aware of the value of brands, many company managers still underestimate the importance of their brand. Careful management of a company's brand and reputation has become essential to its success. It takes time and effort to build a successful brand but this can become tarnished in days, with consequential damage to the value of the company. Brands: Visions and Values features contributions from leading experts on brands, ranging from the image that brands convey to their valuation. This book is a clear and informative look at the importance of brands to corporations and their investors.