Modelling the Impact of Energy-Saving Technological Changes on the Market Capitalization of Companies

Abstract

AbstractThe authors performed modelling of the impact of energy-saving technological changes on the market capitalization of companies. The regularities of the influence of energy-saving technological changes on the financial condition of enterprises are considered. Partial mechanisms of such influence are allocated. Factors influencing the market value of enterprises, such as the size and degree of fluctuations in the profitability of their activities, the volume of these activities, and the level of financial stability of enterprises are identified. Regarding the factors directly affecting the market capitalization of enterprises, they include the expected amount of profit of enterprises and the level of risk of their activities. In order to assess the market value of companies’ equity, it is proposed to capitalize their net profit at a risk-free rate with a further decrease in the result obtained in proportion to the level of riskiness of companies. An evaluation indicator of this level has been constructed, which has a transparent economic meaning and provides a reasonable assessment of the degree of fluctuation of expected profits of companies. A method for decomposing the growth of market capitalization of companies due to introducing energy-saving technologies is proposed. According to the analysis of a sample of one hundred Ukrainian companies, a significant impact of introducing technologies to reduce natural gas consumption on the financial condition and market capitalization of these companies is established. It is established that with the increase in the relative level of investment in introducing energy-saving technologies at the surveyed enterprises there was an increase in the growth rate of their market capitalization. It was also found that introducing energy-saving technologies at enterprises mainly led to the growth of market capitalization of the studied companies. The use in the practice of companies the methodological principles of modelling the impact of energy-saving technological changes on the market capitalization of enterprises, proposed by the authors, will increase the validity of decisions on implementing projects of such changes.KeywordsEnergy-saving technological changeCompanyModellingMarket capitalizationFinancial conditionImpactNatural gas