Market capitalization

About: Market capitalization is a research topic. Over the lifetime, 3583 publications have been published within this topic receiving 77288 citations. The topic is also known as: market cap & market value.

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.

The Functions of the Stock Market and the Fallacies of Shareholder Value

Abstract: Conventional wisdom has it that the primary function of the stock market is to raise cash for companies for the purpose of investing in productive capabilities. The conventional wisdom is wrong. Academic research on sources of corporate finance shows that, compared with other sources of funds, stock markets in advanced countries have been insignificant suppliers of capital for corporations. The purpose of this essay is to build a rigorous and relevant conception of the evolving role of the stock market in the U.S. corporate economy. In fact, the functions of the stock market go well beyond “cash” to include four other functions, which can be summarized as “control,” “creation,” “combination,” and “compensation.” In this paper, I argue, based on historical evidence, that in the growth of the U.S. economy the key function of the stock market was control. Specifically, the stock market enabled the separation of managerial control over the allocation of corporate resources from the ownership of the company’s shares. Yet, assuming that the key function of the stock market is cash, economists known as agency theorists see this separation of control from ownership as the “original sin” of American capitalism, and argue that the evils of managerial control can be overcome by compelling corporate managers as “agents” to maximize the value of corporate shareholders as “principals.” What is missing from the agency-theory argument is a theory of the value-creating firm, or what I call a “theory of innovative enterprise.” The value-creation process requires three social conditions of innovative enterprise: strategic control, organizational integration, and financial commitment. The functions of the stock market may support the types of strategic control, organizational integration, and financial commitment that can result in the generation of high-quality products at low unit costs—the economic definition of innovative enterprise. It is possible, however, that the functions of the stock market may undermine the types of strategic control, organizational integration, and financial commitment that the innovation process requires. In this paper, I provide a brief overview of the role of the control function of the stock market in supporting innovative enterprise in the historical rise to dominance of U.S. managerial capitalism from the early decades of the twentieth century. Then I elaborate the five functions of the stock market—control, cash, creation, combination, and compensation—in terms of the ways in which, from the perspective of the theory of innovative enterprise, each function can support value creation or, alternatively, empower value extraction. I then turn to a discussion of the evolving roles of the five functions of the stock market in major U.S. business corporations over the past century. The concluding section draws on the history of the actual functions of U.S. stock markets to critique the dominant ideology that, for the sake of superior economic performance, a company should be run to “maximize shareholder value” (MSV). I indicate how MSV undermines the social conditions of innovative enterprise: strategic control, organizational integration, and financial commitment.

Analyzing the Relationship Between Systematic Risk and Financial Variables in the Casino Industry

Abstract: Toni Rowe* Jungsun (Sunny) Kim The gaming industry, previous to 2007, had experienced a continued increase in revenues and stock prices, but in late 2007, the industry started to be affected by a recession. To have a better understanding of the relationship between this external economic factor (recession) and a gaming company's systematic risk (beta), this study analyzed which financial ratios are significant predictors of beta and evaluated if these financial ratios better predict beta before or during the recession. The financial ratios examined in this study include return on assets, liabilities as a percentage of assets, asset turnover, quick ratio, EBIT growth rate, and market capitalization. The results revealed that market capitalization was the only variable that had significantly positive impact on beta both before and during the recession. Asset turnover was a significant predictor only before the recession while liabilities as a percentage of assets was significant only during the recession.