Equity issues and other capital actions by publicly listed companies in Finland, 1912–1981

The aim of the paper is to test whether different PTT levels are able to affect the volatility and liquidity of a Stock Exchange. Much research carried out over the last few years has attempted to describe these relationships, yet their empirical results have sometimes contradicted one another (see Section 2). Nevertheless, the innovative contribution of this paper is to study, on a large international scale and through a wide set of indicators, each of the three different PTT dimensions (specifically PTT1, PTT2 and PTT3) in relation to liquidity, on the one hand, and to volatility, on the other. Our attention is focused upon the equity division of the following 18 Stock Exchanges: the Hong Kong Stock Exchange, the Singapore Stock Exchange, the Australian Stock Exchange, the Toronto Stock Exchange, the New York Stock Exchange (NYSE), the NASDAQ, the American Stock Exchange (AMEX), the London Stock Exchange, Euronext (Paris, Amsterdam, Brussels and Lisbon), Deutsche Bourse (Xetra), the Madrid Stock Exchange, Borsa Italia, the Stockholm Stock Exchange, the Copenhagen Stock Exchange and the Helsinki Stock Exchange. All these stock markets are electronic order driven or hybrid markets. Pure quote driven Stock Exchanges are not typically attended by high frequency traders, because they admit orders sent only by market makers.

The stock exchange is the main element of the stock market, and it is also an indicator of the efficiency of capital movement and the rapid development of the economy. It is a virtual marketplace where buyers and sellers can trade existing securities. Stocks are also called stocks or equity, most companies have shares with a turnover of more than a billion dollars. Stock exchanges play a great role in the structure of the leading stock prices, exchange courses and indexes in the country's economy. The stock market acts as a powerful and effective platform for the realization of opportunities for the mobilization of financial resources and the birth of a number of new competitive investment instruments. The main role of the stock exchange is to serve the movement of money capital, which mediates the distribution and redistribution of national income both in the national economy as a whole and between social groups, sectors and spheres of the economy. А stock trading can be considered any market where bonds are bought and sold, the prices of which are determined by offer and purchase. The activity of the stock exchange largely determines the efficiency of the stock market and the degree of influence on economic processes in the country. It is the stock exchange that ensures the concentration of demand and supply of securities, their balance at the expense of stock exchange pricing, which truly reflects the level of efficiency of the functioning of equity capital. For each financial system, the determining factor is the degree of involvement of the banking sector and the stock market in the process of financing the investment activity of enterprises. The development of the stock market increases the degree of participation of companies in the process of raising additional funds for their investment programs by placing their securities on the market, and a developed stock market also plays a key role in financing the economy compared to the banking sector. Therefore, the purpose of this article is to evaluate the process of globalization of the stock market in the world environment and analyze current state. Indicators of the stock market in the world were also considered and the main conditions of restraint to the prospects of its effective functioning were highlighted. The state and development prospects of well-known stock exchanges and further possible directions for improvement of the world stock market are analyzed.

On the informational flow between financial markets: International evidence from thin stock and stock index futures markets

The article is devoted to the study of the current state, problems and prospects of development of the Ukrainian stock market. It is proved that the stock market is a tool for implementing the state's Innovation Policy and a priority factor in mobilizing financial and capital resources. Stock market commodities are securities (stocks, bonds, etc.). Trends, features of functioning and development of the Ukrainian stock market are analysed. The analysis of the main indicators of exchanges, the structure and volume of exchange contracts with securities is carried out. The structural distribution of exchange contracts by trading organizers is established. The analysis of operations with securities on the organized market, unorganized market and stock exchanges of the country is carried out. The largest volume of trading on financial instruments on trade organizers in 2019 was recorded with government bonds of Ukraine – UAH 295 billion according to the National Securities and stock market Commission, the exchange market during 2019 saw consolidation of securities trading on two stock exchanges “Perspektyva” and “PFTS Ukraine Stock Exchange”: 98.7% of the value of exchange contracts. Analysis of the main indicators that determine the state of the stock market has shown that the modern securities market of Ukraine is characterized by an extremely high degree of fragmentation, limited liquidity and a variety of types of securities, which, in turn, are the main obstacles to the development of the stock market and the capital market as a whole. Attention is focused on the main problems that hinder the functioning of the stock market. It is proved that the development of the stock market is hindered by: insufficient competitiveness of the domestic stock market; imperfect tax incentives for market development; low level of corporate governance development; imperfect regulatory and legislative framework of Ukraine; low liquidity and capitalization. The directions of development of the stock market of Ukraine are proposed: improving the efficiency of regulation of issuers; stimulating the inflow of investment to the stock market; ensuring reliable and efficient functioning of the market infrastructure; ensuring the functioning of the unified state policy for stimulating the improvement of the investment climate.

Economic theory predicts a contemporaneous correlation between equity returns and investment growth that is only weakly present in the data. By modifying the firm's production function to include a lag between investment decisions and expenditures, and after correcting for the temporal aggregation of investment, I find the predicted correlation to be present in the data. I estimate the model for 31 industries and find that investment returns are highly correlated with the industry portfolio equity returns. Further, the portion of investment returns orthogonal to equity returns is associated positively with changes in profitability and negatively with lagged differences between equity and investment returns.

Viewing the development of the stock market in Ukraine, the economy, which world financial organizations characterize as small and open, is largely determined by the trends formed by the global stock markets and leading stock exchanges. Therefore, the study aims to analyze Ukraine’s stock market, the world stock market, stock markets in the regions, and to assess their mutual influence. The study uses the data of the World Federation of Exchanges and National Securities and Stock Market Commission (Ukraine) from 2015 to 2020. Stock market performance forecasts are built using triple exponential smoothing. Based on pairwise correlation coefficients, the existence of a significant dependence in the development of the world stock market on the development of the American stock market was determined. Regarding the Ukrainian stock exchanges, only SE “PFTS” demonstrated its dependence on the US stock market. The results of the regression model based on an exponentially smoothed series of trading volumes in all markets showed that variations in the volume of trading on the world stock market are due to the situation on the US stock markets. Trading volume dynamics on Ukrainian stock exchanges such as SE “PFTS” and SE “Perspektiva” is almost 50% determined by the development of stock markets in the American region. Although Ukraine is geographically located in Europe, the results show a lack of significant links and the impacts of stock markets in this region on the major Ukrainian stock exchanges and the stock market as a whole.

Synopsis The research problem This study examined the effect of having debt contracts that contain balance sheet covenants on the decision to make seasoned equity offerings (SEOs). Motivation Prior studies examined the determinants of equity issuance without considering private debt contracts that contain balance sheet covenants. Generally, firms are not restricted from stock issuance when they have financial debt covenants. This might motivate firms to make SEOs when they are more susceptible to balance sheet debt covenant violations. Making SEOs increases firms’ equity capitals in the short term and, therefore, has the direct effect of improving balance sheet covenants in the current period. This effect motivated this study to examine whether firms are more likely to conduct SEOs when their debt contracts include more-restrictive balance sheet covenants. The test hypothesis The hypothesis of the study is in the null form, which states that balance sheet covenant restrictiveness is unrelated to the probability of conducting SEOs. Target population The target population includes shareholders, debtholders, and firm managers. Adopted methodology Panel data estimation was used, specifically, the fixed effects model. Analyses The empirical analysis was conducted on a unique sample of UK listed firms with private debt covenants that is hand-collected from annual reports. Equity issuance in the sample is based on private placements, which are a common type of SEO in the UK. The restrictiveness of balance sheet-based covenants is defined as the number of balance sheet covenants in a loan contract or the tightness of net worth covenant slack. Findings The results show that balance sheet covenant restrictiveness is positively associated with the probability of conducting SEOs through private placements. The baseline result is robust to the application of a number of the controls often used in the literature, including cash shortage, the use of balance sheet covenants in the previous loan contract, earnings management, and the quality of external governance. It is also robust to excluding the financial crisis period and addressing potential endogeneity concerns using a propensity score-matching procedure. Additionally, further analysis provides some evidence that equity issuance by firms with more-restrictive balance sheet covenants is negatively associated with future operating performance, suggesting that these firms may not efficiently use the raised capital.

PurposeThis paper uniquely aims to triangulate the effects of the COVID-19 pandemic, government financial intervention (GFI) policies and power distance (PD) culture on returns of equity indices during the COVID-19 epidemic in the world's equity markets.Design/methodology/approachThe research employs panel data regression analysis using 1,937 observations from 19 developed and 42 developing countries. The data employed contain daily registered COVID-19 cases, global equity market index prices, financial intervention policies introduced by governments and Hofstede's cultural dimension measure of PD.FindingsThe authors find that investors certainly react negatively to the number of confirmed COVID-19 cases reported, that GFI policies indeed reinforce investors' expectations of policymakers' dedication to stabilize the economy during the COVID-19 pandemic and that equity investors in high PD cultures overreact to GFI news, resulting in more positive stock returns. The authors discover a difference between developed and developing countries in terms of the effect of GFI policies and PD on equity returns.Research limitations/implicationsResults suggest that investors react negatively to the daily registered COVID-19 cases. The authors find that financial intervention policies introduced by governments reinforce investors' outlooks of policymakers' commitment to stabilize local stock markets during the coronavirus pandemic. The results confirm that equity market investors in PD cultures overreact to financial intervention news, thus resulting in more positive stock returns.Practical implicationsThe paper provides three original contributions. First, it helps us to understand the single effect of the COVID-19 and financial intervention policies introduced by governments on returns of the global equity market. Second, it examines the possibility of a two-way joint effect between the COVID-19 and financial intervention policies introduced by governments and the COVID-19 and differences in countries characterized by a PD culture concerning stock market returns. Third, it investigates the possibility of a three-way interaction effect between the COVID-19 contagion, financial intervention policies introduced by governments and culture on returns of equity markets.Originality/valueThe authors' findings are valuable to researchers, investors and policymakers. Culture and finance scholars can now observe the role of Brown et al.'s (1988) uncertain-information hypothesis with reference to the effect of the COVID-19 and financial interventions policies introduced by governments on returns of equity markets. This is because the authors' findings underline that since investors' uncertainty declines with daily registered numbers of COVID-19 cases, the introduction of GFI policies function as a neutralizing device to re-establish investors' expectations to equilibrium. Consequently, stock market returns follow a random walk that is free from the negative effect of the COVID-19. The authors' work is likely to advise equity investors and portfolio managers about the extent to which major exogenous economic events such the outbreak of global diseases, financial interventions policies introduced by governments and differences in countries' PD culture can individually and jointly influence the return of the world's equity markets. Investors and portfolio managers can employ the authors' results as a guideline to adjust their investment strategy based on their investment decision strategy during global pandemics. Policymakers aiming to introduce financial intervention policies to stabilize their stock market returns during global pandemics can benefit from our results. They can observe the full effect of such policies during the current COVID-19, and subsequently be better prepared to choose the most effective form of financial intervention policies when the next pandemic strikes, hopefully never.

The article's purpose is to consider the theoretical foundations of the formation and development of the stock market of Ukraine in modern conditions. The report provides a comprehensive study and analysis of the building and development of the stock market of Ukraine. The stock market allows for attracting capital and effectively distributing it for the development of the national economy. The development of the stock market increases the level of participation of companies in attracting additional funds for their investment programs by placing their securities on the market, and a developed stock market plays a crucial role in financing the economy compared to the banking sector. Therefore, on the stock market, enterprises with real potential can attract financial resources to implement a promising project. It was determined that the primary goal of the functioning and development of the stock market in Ukraine should be attracting financial resources to direct them into the real economy to renew production. The functioning of the market is based on specific relations between the participants of the market space, which are simultaneously part of the market and its driving force. It is shown that the stock market is the most important mechanism that ensures the effective functioning of the country's entire economy. Thus, the stock market creates conditions for a free, albeit regulated, transfer of capital to the most efficient sectors of the economy. The current state, problems, and prospects of Ukraine's stock market development are studied. The stock market of Ukraine, in terms of the scale of its development and the ratio to the total volume of financial assets, is not significant. According to the analysis results, it was established that the volume of exchange contracts with securities on trade organizers in 2018-2021 had positive dynamics. Still, according to the results of trading during January-December 2022, compared to the data of the same period in 2021, the volume of trading in financial instruments decreased by 291.36 billion hryvnias. The decrease in the book of trades in financial instruments in 2022 was influenced by the start of military operations. It has been established that the modern stock market is an effective mechanism for trading financial assets. Therefore, it needs to ensure financial and economic stability, contributing to attracting investment flows. Keywords: stock market, securities, issuers, stock exchanges, financial resources, financial investments.

Betas, market weights and the cost of capital: The example of Nokia and small cap stocks on the Helsinki Stock Exchange

This paper investigates the dynamic linkages between stock returns and trading volume in a small stock market, i.e. the Helsinki Stock Exchange in Finland during the period 1977–88. Both linear and...

THE GROWING IMPORTANCE of institutional investors in the market for equity securities is very real and quite impressive. The flights of fancy taken by some observers from this factual base are a much greater tribute to the fertility of their imaginations than to the precision of their analytical skills. Perhaps the most rational, yet most stimulating, of the various ideas advanced is the probability of greater price stability for at least some, and perhaps many, common stocks in future years. This trend, if real, would greatly enlarge the market for equity capital and could be the basis for a major increase in the volume of new common stock financing. More companies would presumably pay out in dividends a higher proportion of earnings with greater confidence in their ability to sell new shares to meet a larger fraction of expansion requirements. This is a fairly restrained flight of fancy, yet it is one unless we can assemble the facts to support it. We know that, in 1900, financial intermediaries held about 8% of the common stocks outstanding and that this fraction is probably now up to 25% or slightly more. In the same period, these institutions increased their share of the corporate bonds outstanding from 35% to around 90%. We can hardly say, therefore, that the equity market has beconle institutionalized in the same sense as we make this statement about the corporate bond market. In terms of current activity, also, the institutional investor does not play a very important role. The transaction studies of the New York Stock Exchange, for example, over a period of several years show little change in the fraction of total trading attributable to institutions and intermediaries. The average of 15 % compares with 60% for public individuals and 25% for members and non-member security dealers. Even when allowance is made for heavy institutional participation in off-the-Board transactions, it is evident that individual investors and professional traders dominate day-to-day and hour-to-hour price movements. But statistics of ownership and activity do not tell the whole story. Even relatively small additions to the demand for stocks over a period of time may have important effects. To illustrate this point, during the five years 1946-1950, when stocks were chronically undervalued, one particular group of institutional investors composed of pension funds, insurance companies, and investment companies made net purchases of common stocks equivalent to 29% of net new issues of this type of security. During the subsequent five years, 1951-1955, of substantial upward revaluation of stocks, the same group of investors bought stocks equivalent in value to 35 % of net additions to the supply. (These are not, of course, all of the institutional investors by any means.) Although one should not ignore many other influences at work on the stock market, such as confidence in the business outlook and fear of inflation, I insist that there is more than coincidence in this sequence of events. The Revenue Act of 1942 and subsequent tax laws made the income, estate, and gift tax structure really progressive, greatly curtailing the ability of the high-income bracket investor to supply new equity capital. When demand for such funds reappeared starting in 1946, we had a genuine shortage of equity money. This was reflected in high stock yields even though business was good and interest rates were low. But the shortage began to ease after 1950 as legislation was passed to permit New York life insurance companies and mutual savings banks to invest in equities for the first time, while trustees of personal trust funds were empowered to buy stocks in legal trusts to a limited extent. Most important of all was the impact of this wider acceptance of equities on the policies of non-insured private pension funds which put increasing amounts each year into this area of investment. In a very real sense, then, the institutional investor has filled the shoes of the wealthy individual as an important supplier of new equity money. When pension funds currently invest $800 million a year in equities, instead of $100 million a year, as they did a decade ago, the increase is equivalent to almost a third of the average new money raised through common stock flotations during recent years. The contribution of mutual funds to the process of replacing the historical source of new equity capital is equally impressive. A large part of the new money assembled from middle-income groups by these organizations would not otherwise have been made available to the stock market. There can be no question of the influence in a quantitative sense of these new suppliers of equity money. Without them it is difficult to see how the stock market could have functioned effectively during the years of postwar property. A market starved for funds received timely and substantial nourishment. The individual investor was not crowded out, but he found a new and active partner. This is a fact of the 1950's. The standard portrait of the institutional investor in the minds of many people shows a sober finance committee of senior citizens filling great vaults with blue-chip stock certificates: buying but never selling, unimaginative and conservative in attitudes, and generally doing a mediocre job in a highly respectable manner. Even if such a portrait were ever entirely valid, which I doubt, it is certainly no longer typical. Investment company, pension fund, insurance company, and other institutional portfolio managers are operating in a keenly competitive environment with resources which can command the best talents available in the field of investment management. The pressure to produce superior results is absolutely unremitting. Just because the goals are set in a longer time dimension than is typical for many individual investors does not mean that producing a combination of income and capital growth are not both real and pressing objectives. Thinking of the institutional investors as a substitute for

Revisiting Index Methodology for Thinly Traded Stock Market. Case: Helsinki Stock Exchange

Durations between Equity and Debt Issues and Their Effect on the Offering Announcement Returns

This note adds to previous Scandinavian evidence produced by the Jennergren & Korsvold (1974, 1975),' Jennergren (1975), Jennergren & ToftNielsen (1977), Korhonen (1977) and S0rensen (1982) studies of stock market return randomness. In daily data sets from the Oslo and Stockholm Stock Exchanges, Jennergren & Korsvold (1975) found evidence of nonrandomness in a majority of the 45 stocks studied. A similar result was later reported for the Copenhagen exchange by Jennergren & Toft-Nielsen (1977). Subsequent studies by Jennergren (1975) and S0rensen (1980) further indicated that the serial correlation inherent in Stockholm and Copenhagen data was strong enough to allow supernormal yields on simple filter strategies.2 The data for our study consist of daily trading or, when closings did not occur, bid prices adjusted for dividends and issues for all stocks quoted on the Helsinki Stock Exchange (HESE) between February 2, 1970 and December 31, 1981, along with data on daily trading volumes for the years 1977-81.3 The price file is based on the KOP-index file.4 Throughout this note, comparisons with previous results for other Scandinavian exchanges are made. Allowing for variations in sample periods, we attempt a study of whether a smaller annual turnover of an exchange effects the degree of nonrandomness exhibited by its stock returns. Of the