Showing papers on "Market capitalization published in 2012"

Government Quality Determinants of Stock Market Performance in African Countries

Abstract: How do government policies and institutions affect stock market performance? As stock markets grow broader and deeper in African countries, the question becomes more critical. Government quality dynamics of corruption control, government effectiveness, political stability or no violence, voice and accountability, regulation quality and rule of law are instrumented with income levels, religious dominations, press freedom degrees, and legal origins to account for stock market performance dynamics of capitalization, value traded, turnover and number of listed companies. The results demonstrate a significant positive association between stock market performance measures and the quality of government institutions. These findings suggest countries with better developed government institutions would favor stock markets with higher market capitalization, better turnover ratios, higher value in shares traded and greater number of listed companies.

Does Sustainable Development Foster Value Creation? Empirical Evidence from the Global Energy Industry

Abstract: The relationship between a firm's sustainability efforts and its financial performance has gained increasing interest among academia and in the press in recent years. In this study we focus on the energy industry in which sustainability issues are of special interest, but in which context the association between firm performance and sustainable development has not yet been studied. The data for this study consists of two groups of firms: firms that are included in the Dow Jones Sustainability Indexes (DJSI), and the biggest firms from the global energy sector. The financial performance of the companies is analyzed from different perspectives, and the data is gathered from years 2000, 2005, and 2009. The empirical analysis finds evidence of a positive association between sustainable development and firms' financial performance, especially when performance is measured as the market capitalization value. Copyright © 2011 John Wiley & Sons, Ltd and ERP Environment

Agency Cost, Corporate Governance and Ownership Structure (The Case of Pakistan)

Abstract: The article attempts to investigate the role of ownership structure and corporate governance in mitigating agency cost in a sample of 50 firms selected on the basis of market capitalization from “Karachi Stock Exchange” during the period 2003 to 2006. We used the proxy asset utilisation ratio to measure agency cost. Multivariate fixed effect regression is used to analyze the data. The explanatory variables include director ownership, institutional ownership, external ownership, board size, CEO/Chair duality, remuneration structure and board independence. The results show that higher director and institutional ownership reduces the level of agency cost. Smaller sized boards also results in lowering agency cost. Board independence has positive association with asset utilisation ratio. The separation of the post of CEO and chairperson and higher remuneration lower agency cost.

Macroeconomic Determinants of Stock Market Development in Emerging Markets: Evidence from Kenya

Abstract: We examine macro-economic determinants of stock market development in Kenya for the period 2000 to 2009, using quarterly secondary data. The hypothesis on the existence of a co-integrated relationship between stock market development and macro-economic determinants is tested using Johansen-Julius co-integration technique. While an error correction model is used in estimating the relationship between macroeconomic variables, on the one hand, and stock market development on the other. The results indicate that macro-economic factors such as income level, banking sector development and stock market liquidity are important determinants of the development of the Nairobi Stock market. The results also show that macro-economic stability is not a significant predictor of the development of the securities market. Keywords: Stock market, macroeconomic factors, Kenya

Do industries matter in explaining stock returns and asset-pricing anomalies?

Abstract: Industry returns cannot be explained fully by well-known asset pricing models. This study reveals that common factors extracted from industry returns carry significant risk premiums that go beyond the explanatory power of size, book-to-market (BM) ratios, and momentum. In particular, this study shows that (1) the small-firm effect is significant only for firms whose market capitalization is below their industry average; (2) the BM effect is an intra-industry phenomenon; (3) a one-year momentum effect is significant only for firms whose BM ratio is smaller than the industry average and limited to non-January months; and (4) there is seasonality in all effects that cannot be explained by risk-based asset-pricing models. Neither rational nor behavioral theories alone can explain industry returns, and it is perhaps too hasty to attribute asset pricing anomalies to a single driving force.

Prediction of Stock Performance in the Indian Stock Market Using Logistic Regression

Abstract: The authors use logistic regression (LR) and various financial ratios as independent variables to investigate indicators that significantly affect the performance of stocks actively traded on the Indian stock market. The study sample consists of the ratios of 30 large market capitalization companies over a four-year period. The study identifies and examines eight financial ratios that can classify the companies up to a 74.6% level of accuracy into two categories – “good” or “poor” – based on their rate of return. The paper asserts that the model developed can enhance an investor's stock price forecasting ability. Macroecomonic variables, which also can influence the share price, were not taken into account, however. The paper dicusses the practical implications of using the LR method to predict the probability of good stock performance. The authors state that the model can be used by investors, fund managers, and investment companies to enhance their abilty to select out-performing stocks.

A Call Auction’s Impact on Price Formation and Order Routing: Evidence from the NASDAQ Stock Market

Abstract: Electronic call auctions are used globally to open and close equity market trading; as such, they are a critically important facility that needs to be better understood. The paper focuses on the impact NASDAQ’s calls (introduced in 2004) have had on bid-ask spreads, price volatility, and order routing in the continuous market that follows daily openings and which precedes daily closings. NASDAQ’s closing call has significantly reduced both spreads and volatility for all market capitalization groups. Its opening call similarly reduced spreads, while a generally similar, though somewhat weaker, pattern of volatility reduction was realized. Although the pattern of trading volume has, for the most part, not been significantly affected, our findings, comprehensively viewed, suggest that the calls have had a positive spillover effect on the dynamic behavior of price formation in NASDAQ’s continuous market.

The Company's Policy, Firm Performance, and Firm Value: An Empirical Research on Indonesia Stock Exchange

Abstract: This study examined the role of company performance in determining the direction of the relationship between the company's policies to value the company. The goal is to identify where the role of company performance as a variable that is affected by the company's policies and influence the value of the company. Tests carried out in stages to test the effect of the company's policies on corporate performance and corporate value, and examine the effect of company performance on firm value. The study was conducted in Indonesia Stock Exchange (IDX) with a sample of manufacturing firms listed on the IDX in 2008 to 2010 with the purpose of sampling method. The results showed that financial leverage has a significant negative effect on the significance level of less than 1% of the company performance, and a significant positive effect on the level of significance of 5% of the value of the company. Incentive managers have a positive effect, but not significant to company performance, and a significant positive effect on the significance level of less than 1% of the value of the company. Capital expenditure has a significant positive effect on the level of significance is less than 1% of the company performance, and a negative effect, but no significant effect on firm value. The company's performance has positive and significant at the significance level of less than 1% of the value of the company.

The Stock Selection and Performance of Buy-Side Analysts

Abstract: Prior research on equity analysts focuses almost exclusively on those employed by sell-side investment banks and brokerage houses. Yet investment firms undertake their own buy-side research and their analysts face different stock selection and recommendation incentives than their sell-side peers. We examine the selection and performance of stocks recommended by analysts at a large investment firm relative to those of sell-side analysts from mid-1997 to 2004. We find that the buy-side firm’s analysts issue less optimistic recommendations for stocks with larger market capitalizations and lower return volatility than their sell-side peers, consistent with their facing fewer conflicts of interest and having a preference for liquid stocks. Tests with no controls for these effects indicate that annualized buy-side Strong Buy/Buy recommendations underperform those for sell-side peers by 5.9% using market-adjusted returns and by 3.8% using four-factor model abnormal returns. However, these findings are driven by differences in the stocks recommended and their market capitalization. After controlling for these selection effects, we find no difference in the performance of the buy- and sell-side analysts’ Strong Buy/Buy recommendations.

Intellectual capital disclosures by Indian and Australian information technology companies : A comparative analysis

Abstract: Purpose – The purpose of this paper is to investigate and compare the voluntary reporting of intellectual capital (IC) by the top 20 software and technology sector companies in a developing nation, India, and a developed nation, Australia. The paper aims to highlight the differences in IC disclosure practices of the companies operating in two different economies.Design/methodology/approach – The study investigates the top 20 firms by market capitalisation listed on the Bombay Stock Exchange in India and the Australian Stock Exchange in Australia in the year 2007‐2008. Using the content analysis method, the paper reviews the annual reports of these firms to determine IC disclosure trends in India and Australia. Statistical tools and graphs have been used to compare and contrast ICD disclosures in two countries.Findings – The study has identified IC disclosure differences between Indian and Australian firms, and reports disclosures by Indian companies are on a higher scale than Australian Software and Techn...

Stock markets, corporate finance, and economic growth

Abstract: During the past decade the capitalization of emerging markets increased twentyfold. In 1994 trading on these markets accounted for about 17 percent of the $9.6 trillion of shares traded on the world's stock markets, up from a mere 3 percent of the much smaller $1.6 trillion in 1985. This rapid growth in emerging stock market activity raises critical questions for developing country policymakers. What effect do stock markets have on economic growth? How does stock market development affect firms' financing decision? And if stock markets are good for growth, what policies can governments adopt to foster their development? This note summarizes answers to these questions drawn from a recent research project.

Unemployment and finance: how do financial and labour market factors interact?

Abstract: Using data for 18 OECD countries over the period 1980-2004, we investigate how labour and financial factors interact to determine unemployment. We show that the impact of financial variables depends strongly on the labour market context. Increased market capitalization as well as decreased banking concentration reduce unemployment if the level of labour market regulation, union density and coordination in wage bargaining is low. The above financial variables have no effect otherwise. Increasing intermediated credit worsens unemployment when the labour market is weakly regulated and coordinated, whereas it reduces unemployment otherwise. These results suggest that the respective virtues of bank-based and market-based finance are crucially tied to the strength of labour regulation.

Modelling the Long Run Determinants of Foreign Portfolio Investment in Nigeria

Abstract: This study tries to ascertain the long run determinants of foreign portfolio investment (FPI) in Nigeria such thatappropriate policies will be pursued to attract same in the long run. FPI has grown recently in proportion relative toother types of capital inflows to Nigeria before the wake of global financial crisis. Incidentally, there is no empiricalregularity regarding the determinants of FPI. This study tries to add to the stock of knowledge by modelling thelong-run determinants of FPI in Nigeria over the period of 1981-2010 converted into quarterly series. The variablesconsidered are, market capitalization, real exchange rate, real interest rate, real gross domestic product and tradeopenness. The study applies time series analysis specifically the finite distributed lag model and discovers that FPIhas a positive long-run relationship with market capitalization, and trade openness in Nigeria. Ongoing effortstherefore to sanitize the capital market should be vigorously pursued. Keywords : Nigeria, Foreign Portfolio Investment, macroeconomic variables.

Inter-Relationship between Profitability, Growth and Size: A Case of Non-Financial Companies from Pakistan

Abstract: The purpose of this paper is to provide an in-depth description of the inter-relationship between firm size, growth, and profitability of non-financial companies listed at Karachi stock exchange. The study is based on the sample of 70 (seventy) non-financial companies listed at Karachi Stock Exchange of Pakistan, selected on the basis of their market capitalization. Panel data techniques were employed using 700 observations of each of the variables of study; size (log natural of total assets), growth (sustainable growth rate for firm) and profitability (return on assets). Observations are collected for ten years (2001-2010). The study concluded that there is study reveals that all the profitability has strong positive relationship with the growth of the firm; however size has less significant and negative impact on the profitability. One suggestion for further research would be to replicate the study in order to get more cases. Furthermore, it would be valuable to take a more long-term focus to examine the described relationships in the long run. The paper highlights the importance of these measures which are generally used for performance evaluation. Paper sets out the criteria that under which situations the company should focus which of the measure, so that company may derive its strategies on that way. This paper improves our preferences about the three major measures of the firm. Moreover, it contributes to the literature of financial management that how these three measures have trade-off between them.

Forecasting Stock Performance in Indian Market using Multinomial Logistic Regression

Abstract: The objective of this paper is to predict the outperforming stock with the help of Multinomial Logistic Regression (MLR). This paper uses financial ratios as usable selection criteria for determining performance in the stock market i.e. into three categories GOOD, AVERAGE and POOR based on the stock return and variance comparing with market return and variance. The sample of the study consists of 30 large market capitalization companies’ ratio of four years, which are actively traded in the Indian Stock Market. Using various financial ratios as the independent variables, this study investigates and determines the financial indicators that significantly affect the share performance by ð using ð Multi ð Logistic ð Regression ð Method. ð A Multi Logistic Regression was constructed with seven financial ratios i.e., Book Value (BV) , PBIDT/Sales(PBIDTS) and Earnings per Share(EPS), Percentage change in operating profit(OP), Percentage change in net sales(NS),Price to Cash earnings per share(PECEPS), Price to book value(PEBV). The classification results showed high predictive accuracy rates of 56.8%.The model developed here can enhance an investor's stock price forecasting ability. The macro-ecomonic variable which also can influence the share price has not taken into account. The paper dicusses the practical implications , how Multinomial Logistic regression method can be used for prediction of the probability of good stock performance .The model can be used by investors, fund manager and investment companies to enhance their abilty to pick outperforming stock. This paper adds value to equity investor, fund manager, investment companies . So far in India no attempt has been made to use Multi logistic regression to predict stock performance with the help of financial ratios.This paper examines , how it can be used for prediction of stock market return in the Indian market.

Stock return anomalies: Evidence from the Johannesburg Stock Exchange

Abstract: This paper investigates the presence of stock return anomalies for stocks listed on the Johannesburg Stock Exchange, covering the period from 1985 to 2010. Explanatory variables include market capitalization, book-to-market equity ratio, momentum in stock returns, net share issues, yield-to-book equity ratio, accrual of operational assets and growth in total assets. It is demonstrated that the sorted returns approach, compared to either correlation or regression analysis, provides much more detailed information regarding the relationships between explanatory variables and stock returns. We find that the anomalous behaviour of stocks on the JSE is in many respects similar to the behaviour observed by Fama and French on the NYSE, and that anomalous return behaviour is still present after compensating for risk. Different types of anomalous behaviour are present within different stock size categories. This study provides further evidence against accepting the EMH in its strong or semi-strong form, as ...

Law, Finance and Innovation: The Dark Side of Shareholder Protection

Abstract: Proponents of minority shareholder protection state that national legal institutions protecting small investors boost stock markets and, in turn, long-term countries’ performance. In this paper, we empirically challenge this argument. We perform three-stage least-square estimation on a sample of 48 countries over 1993-2006 and find that countries with stronger shareholder protection tend to have larger market capitalization but also lower innovation activity. We cope with stock market’s endogeneity and industry heterogeneity, and circumvent omitted variables bias, so that this finding is unlikely to be driven by misspecification problems. We interpret our estimation results arguing that stronger shareholder protection may depress, rather than encourage, the most valuable corporate productions, because it enables small and diversified shareholders to play opportunistic actions against undiversified stockholders, after specific investments are undertaken by the company; innovation activity, largely based on specific investing, is particularly exposed to this problem.

The IPO of Industrial and Commercial Bank of China and the ‘Chinese Model’ of Privatizing Large Financial Institutions

Abstract: We examine the privatization process of the Industrial and Commercial Bank of China (ICBC), the largest bank in the world by market capitalization, and its dual IPOs in the Hong Kong and Shanghai Stock exchanges in 2006. The Chinese government retains majority equity ownership of ICBC while foreign institutional investors hold minority equity stakes. Other large financial institutions went through the same reform process and have similar, post-IPO ownership structures. The largest Chinese banks, as a group, outperformed their counterparts from other emerging and developed markets before and during the 2007-2009 financial crisis. We argue that the ‘Chinese model’ of privatizing and managing large financial institutions can be advantageously used in other countries.

The company fundamental factors and systematic risk in increasing stock price

Abstract: Some factors in increasing stock price can be interesting when they are scrutinized. Whataffects the stock price so far has been the pursuit of any business recently. The research isaimed at identifying the effect of company fundamental factors (Earning per Share, PriceEarning Ratio, Debt to Equity Ratio, Current Ratio, Net Profit Margin, Dividend Payout Ratio,Return on Asset) to stock price and the extent of Beta (?) effect as measurement of systematicrisk in explaining the variance of prices in Indonesian Stock Exchange. Using regressionanalysis and McKinnon, White, and Davidson test (MWD test), the result found that thefunctional relational model is linier-log. According to the result of estimation to stock prices,it is discovered that EPS, PER, and HSM variables have positive and significant effects tostock prices, while DER and NPM variables have negative and significant effects. EPS is thedominant variable with strong relation to stock prices.

Foreign Exchange Reserve and its Impact on Stock Market Capitalization: Evidence from India

Abstract: This paper tries to assess relationship between foreign exchange reserves of India and BSE market capitalization on the basis of annual data from the year 1990-91 to2010-11. This study uses simple linear regression model, unit root test, granger causality test to measure the relationship between foreign exchange reserves of India and BSE market capitalization. The results depicts that foreign exchange reserves of India has positive impact on BSE Stock Market capitalization. The granger causality test suggests that stock market capitalization (SMC) does not Granger cause foreign exchange reserve (FOREXR) at all where as foreign exchange reserve (FOREXR) Granger causes stock market capitalization (SMC). That means the Granger Causality Test shows that causality is unidirectional and it runs from foreign exchange reserve to stock market capitalization but not vice versa. This study sheds lights and provides significant information that will guide the stock broker s, agents, planners, government policy makers to make decision about the stocks and stock markets of India especially about BSE by looking at the trend of foreign exchange reserves of India. Keywords: Foreign exchange reserve, stock market, capitalization, India, BSE.

Analisis nilai perusahaan, kinerja perusahaan dan kesempatan bertumbuh perusahaan terhadap return saham pada perusahaan manufaktur yang listing di bei

Abstract: In the era of globalization of capital markets have a very important role in the economic activitiesof a state. The company is one of the forming of GDP within a state. Investors are oneof important components in the financing activities of a public company, and the return isvery important for investors because investors expect a high return on their infestations. Sothe value of the company, company performance and growth opportunities the company canbe used as benchmarks to know the stock return. The purpose of this study was to determinethe effect of corporate value, corporate performance and the opportunity to grow the companyto stock returns. The samples used in this study were 175 manufacturing companieslisted on the Indonesia Stock Exchange (BEI) in the period 2006-2010. Statistical tests usedwere multiple linier regression tests. Statistic test results indicate that the value of the companyand corporate performance affect stock returns. It can be seen from the F test and t testwhich showed positive results, which means the value of the company and corporate performancesignificantly to stock returns. The opportunity to grow the F test and t test showednegative results, which means that the company did not grow significantly on stock returns.This is because the opportunity to grow a company not only from the increase or decrease infixed assets but because of other factors.

Market value of sustainability business innovations in the construction sector

Abstract: The possible connection between sustainability innovations and the market capitalization of construction sector companies is examined. This is the first known study to test statistically the connection between sustainability innovations and the market value of companies in the construction sector. An event study model is used to analyse sustainability innovation announcements and financial information of large construction sector companies in a number of countries. The main finding of the analysis is that a positive and statistically significant association exists between sustainability innovation announcements and the market value of companies in the construction sector. According to the results, sustainability innovation announcements explain an increase of 0.82% in the market capitalization of the studied companies. The findings are in line with earlier studies suggesting that investments of construction sector companies in sustainability can lead to the creation of economic value. The results imply th...

The Impact of Financial Deepening on Economic Growth: Evidence from Nigeria

Abstract: This paper examined the impact of financial deepening on economic growth in Nigeria. Adopting the supply-leading hypothesis using variables such as broad money velocity, money stock diversification, economic volatility, market capitalization and market liquidity as proxies for financial deepening and gross domestic product growth rate for economic growth, we found that broad money velocity and market liquidity promote economic growth in Nigeria while money stock diversification, economic volatility and market capitalization did not within the period studied (1992-2008). Government policy should therefore be geared towards strategically increasing money supply and promoting efficient capital market that will enhance overall economic efficiency, create and expand liquidity, mobilize savings, enhance capital accumulation, transfer resources from traditional sectors to growth inducing sectors (such as manufacturing and industry, agriculture and the services sectors) and also promote competent entrepreneurial response in various sectors of the economy. Keywords: Financial Deepening, Economic Growth, Supply-leading Hypothesis

Energy Factors, Leasing Structure and the Market Price of Office Buildings in the U.S.

Abstract: This paper presents an empirical analysis the relationship between energy factor markets, leasing structures and the transaction prices of offce buildings in the U.S. We employ a large sample of 15,133 office building transactions that occurred between 2001 and 2010. In addition to building characteristics, we also include information on the operating expenses, the net operating income, and the market capitalization rates at sale to estimate an asset pricing model for commercial office real estate assets. A further set of important controls in our analysis is the one-to-twelve month forward contract prices and the shape of the forward contract price curve, using auction data for the regional electricity trading hubs in which the building is located and auction data from the Henry Hub for natural gas. We also include weather metrics in the form of the variance in the last twelve months of minimum and maximum temperature and precipitation for each building's location and sale date. Our final set of controls includes information on the dominant contractual leasing structure of the buildings. Our empirical results suggest that Energy Star labels do not explain additional variance in property prices once the key asset pricing factors of expenses, income and market capitalization rates are included. Energy factor market prices, the shape of the energy forward price curves, and weather metrics are consistently shown to be statistically significant determinants of office building transaction prices, suggesting that commercial office building prices are likely to be exposed to shocks in these markets.

Determinants of IPOs Initial Return: Extreme Analysis of Indian Market

Abstract: This paper attempts to design and test empirical models, which integrate theoretical, institutional, and other factors, which interact to explain ownership structure. Ex-ante information at the level of under-pricing succeeds the Indian stock market crunch. The study is based on IPO that listed at Bombay stock exchange given that April 2000 to December 2011. Multiple linear regressions are used to distinguish the relationship between various independent variables with the dependent variable, i.e. level of underpricing. The outcomes of multiple regressions reveal that, firm’s age, IPO years, book building pricing mechanism, ownership structure, issue size, & market capitalization explained 44% of the variation in issuer under-pricing, Durbin Watson’s value subsisted 1.58, which indicates that, there is a positive sequential rela-tionship between variables. Number of share offered, issue size, market capitalization, subscription offer timing, book building mechanism and IPO years 2006, 2009 & 2011 are constructed to have important effect on the level of underpricing after the Indian market crisis. Nevertheless, firm’s age, IPOs year 2008, private issuing firms, non institutional promoters, Indian promoters and non institutional non promoters contain no significant difference in the level of underpricing after-market crisis.