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.

Corporate diversification and accrual and real earnings management: A non-linear relationship

Abstract: This study aims to examine the non-linear relationship between corporate diversification and real and accrual earnings management, using a sample of 5,659 US firm-year observations for 1,221 firms covering the period from 2001 to 2012.,The authors use various techniques and regressions to test the hypotheses. Following prior research, several proxies have been used to measure diversification, accrual earnings management and real earnings management.,The study produces several important findings. First, the study provides evidence that diversified firms engage in real and accrual earnings management to manage their reported earnings upward. These results are consistent with recent research (Farooqi et al., 2014; Jirapon et al., 2008) that finds that diversified firms engage in earnings manipulation. Second, and most importantly, the study contributes to the literature by providing the first evidence on a non-linear relationship between corporate diversification and earnings management. Specifically, the study provides evidence that diversified firms engage in accrual (real) earnings management, but this engagement is associated with level of diversification in a non-linear U-shaped (inverted U-shaped) relationship.,Like all other studies, the current study has some limitations. The study was conducted only on the largest firms in the USA that have market capitalization of more than US$10m; hence, the findings may not be generalizable to small publicly traded firms. Further, the findings may not be generalizable to other markets, given the unique characteristics of US markets such as the presence of very sophisticated investors.,This study provides some important implications for US regulators to revise their regulations to prevent diversified firms from using earnings management to manipulate reported earnings.,This study is the first in the USA to examine the non-linear relationship between corporate diversification and earnings management. The study focuses on one of the most active, most attractive and largest capital markets throughout the world, that of the USA. Also, this study is one of the few studies that examine whether diversified firms use real activities manipulation to manage their reported earnings.

Look at me now: the role of cross-listing in attracting U.S. investors

Abstract: We use a comprehensive 1997 survey to examine U.S. investors' preferences for foreign equities. We document a variety of firm characteristics that can influence U.S. investment, but the most important determinant is whether the stock is cross-listed on a U.S. exchange. Our selection bias-corrected estimates imply that firms that cross-list can increase their U.S. holdings by 8 to 11 percent of their market capitalization, roughly doubling the amount held without cross-listing. All else equal, we find that firms experience smaller increases in U.S. shareholdings upon cross-listing if they are Canadian, from English-speaking countries, are members of the MSCI World index, or had higher quality accounting standards prior to cross-listing. We argue that these findings suggest that improvements in information production explain U.S. investors' attraction to foreign stocks that cross-list in the United States.

Assessing the impact of stock market development on economic growth in Saudi Arabia : an empirical analysis

Abstract: The relationship between stock market development and economic growth has long been a significant subject of debate. Some argue that a well-functioning stock market can have an accelerating effect on economic growth by channelling more savings to investment and enhancing capital productivity through the efficient allocation of resources. In contrast, others hold that stock market development has little relevance to real economic activity or even that may be harmful to the economy. The majority of empirical studies on this topic focus on advanced markets and developed emerging markets, and no major study exists for markets in petroleum-based economies, such as Saudi Arabia. This research therefore aims to conduct an empirical analysis of the overlooked role of stock market development in the economic growth process in the case of Saudi Arabia; thereby it aims to examine the effect of stock market development on economic growth in Saudi Arabia. In order to achieve the research aim, a mixed method approach is taken, combining quantitative and qualitative methods to enhance the study’s validity and reliability. In the initial empirical chapter, time-series econometric analysis is utilised to measure the nexus between economic growth and stock market. After treating the data for time series features, the OLS regression analysis showed the market capitalisation (LNMC) variable was statistically significant in all of the results presented. In addition, the number of shares traded (LNNST) was found to be significant in all of the results, except in the non-oil PSGDP model. These results indicate that the Saudi economy in general still relies on oil revenues and fiscal policies. As part of the econometric analysis, the results of the Granger causality analysis produced inconclusive results, which revealed that the government plays an active role in the economy and intervenes when the macro-economic performance does not achieve the desired results. These interventions seem to be situational rather than long-term and structural. The causal relationships from the independent variables of the financial markets weakened, when the influence of the oil revenues was removed from the equation, suggesting that the Saudi financial markets still rely heavily on oil revenues. Finally, the results of Error Correction Model or ECM with all the models for GDP showed that there is a bi-directional causality that runs from GDP, NOGDP, NOPSGDP, GFC and NOGFC to MCR, and to NST. The Error Correction Model of ECt-1 shows that the significant results indicate the speed of adjustment to the long-run equilibrium, and reveal the direction of causality. Secondly, in an attempt to provide qualitative meaning to the results, eighteen interviews were conducted with respondents closely linked to the stock market, in order to elicit their opinions. These interviews complemented the empirical work and added better understanding to the study’s findings. The analysis of the interviews shows that the Saudi stock market is an emerging market, which has undergone several stages of development. Some of the interviewees were optimistic, believing that movements of stock market prices over the next five years may be more stable as a result of the strength of the Saudi economy. Those with an optimistic outlook saw more stability, improvement and profits, while those with a more pessimistic outlook foresaw more volatility, fluctuations and losses.

Stock market manipulation: A comparative analysis of East Asian emerging and developed financial markets

Abstract: The study investigates the firm’s specific characteristics of manipulated firms in East Asian emerging and developed markets using hand-collected 244 manipulated cases between 2001 and 2017. The empirical analysis is conducted using panel logistic regression to identify which stocks are more likely to be manipulated. Result shows that large and highly liquid firms were more likely to be manipulated in both emerging and developed markets. Additionally, marginal effect shows that firms with high free float and market capitalization had a higher probability of being manipulated in these markets. On the contrary, profitable firms were less likely to be manipulated in both developed and emerging markets. Limited studies have been conducted to empirically identify the characteristics of the manipulated stocks across the developed and emerging markets. The regulator can use these results to identify possible and expected manipulation and to design enforcement rules, accordingly. Further, investors can take into consideration these characteristics of manipulated stocks while designing their portfolio in order to reduce the portfolio risk.