Stock Market Capitalization Research Articles

An empirical analysis of impact of banking sector on Indian stock market

PurposeThis study attempts to examine the relationship between the banking sector and stock market development in India.Design/methodology/approachTo analyze the relationship between banks and stock market development, the ratio of stock market capitalization to GDP is proxied by stock market development. The determinants of the stock market development are used for analysis namely domestic credit to the private sector as a ratio of GDP is used as a proxy for the development of banks, saving rate, per capita real GDP, and inflation. The autoregressive distributed lag (ARDL)-Bounds testing approach is used for the analysis. The paper also used the unrestricted error correction model and CUSUM and CUSUM square test to check the stability of the model.FindingsThe ARDL bounds test found that there is a long-run relationship between stock market development and bank-centered financial development. The results also revealed that the stock market is positively influenced by the development of banks, savings, and per capita real GDP in the short-run as well as long-run.Research limitations/implicationsThis paper suggests that improvement of banking sector plays an important role to increase liquidity of the capital market development in India. This paper also suggests that the economic growth and savings rate have positive impact to induce the capital market growth in both short run and long run.Originality/valueThe study has investigated the empirical relationship between the banking sector and the stock market development in a different methodological approach by using an ARDL model which is appropriate for a small sample size. There are few studies related to bank-centered financial development and stock market development in the context of India.

POTENTIAL AND POSSIBLE EFFECT OF THE DEVELOPMENT OF GEORGIAN FINANCIAL MARKETS

POTENTIAL AND POSSIBLE EFFECT OF THE DEVELOPMENT OF GEORGIAN FINANCIAL MARKETS

A wealth tax on corporations’ stock

Abstract We propose to institute a new tax on corporations’ stock shares for all publicly listed companies and large private companies headquartered in G20 countries. Each of these companies would have to pay 0.2% of the value of its stock in taxes each year. As the G20 stock market capitalization is around 100% of world GDP, the tax would raise approximately 0.2% of world GDP in revenue. Because stock ownership is highly concentrated among the rich, this tax would be progressive. The tax could be paid in kind by corporations (by issuing new stock) so that the tax does not raise liquidity issue nor affect business operations. In today’s globalized and fast-moving world, companies can become enormously valuable once they establish market power, even before they start making large profits (e.g., Amazon and Tesla). This tax would make them start paying taxes sooner than standard income taxes.

Macroeconomic Variables and Effect on Stock Prices: Correlation Evidence from Nepal

This paper attempts to study the macroeconomic factors that affect the stock prices in Nepal. It considers the annual data of four macroeconomic variables that affect the NEPSE Index; inflation rate, broad money supply, gross domestic product, and per capita income from 2011-2021 and tries to find out the influence of these variables on the NEPSE index (stock prices). It uses the Pearson correlation matrix to study the relationship between stock prices ad macroeconomic variables. The results obtained from correlation analysis revealed that market performance of stock prices is found to respond positively to broad money supply and gross domestic product and negatively to the inflation rate as expected. Also, the NEPSE index is not affected by the changes in the per capita income of the nation. These findings help to build up economic and financial policies in the nation and stabilize the capital stock market in Nepal.

Determinan Indeks Harga Saham Gabungan (IHSG) Jangka Pendek dan Panjang

Abstract: Purpose: This study aims to analyze the effect of stock market capitalization and external factors on the Composited Stock Price Index (IHSG). Research methodology: This study uses secondary data with the type of time series data obtained from the publication of the official website of The Otoritas Jasa Keuangan (OJK), U.S. Energy Information Administration (EIA), London Bullion Market Association (LBMA) and Yahoo Finance for the period January 2011 - December 2020. The model used in this study is the Error Correction Model (ECM). Results: The results showed that all independent variables in the short term had a significant effect on The IHSG. Stock market capitalization, world oil prices and The Hang Seng Index have a positive effect, while world gold prices have a negative effect. The Error Correction Term (ECT) has a coefficient of -0.2045 with a significant negative direction with a 5% confidence level. Shows that the Adjustment Mechanism Processes in the long-term balance lasts for 20 months. Keywords: 1. ECM 2. Hang Seng Index 3. IHSG 4. Stock Market Capitalization 5. World Gold Prices 6. World Oil Prices

Financial Development and Economic Growth in Nigeria (1986-2020)

This study examined financial development and economic growth in Nigerian from 1986 to 2020 using data sourced from the CBN statistical bulletin (2020). The Nigerian financial sector is fraught with fissures that have frustrated its potential to facilitate economic growth, Funds accumulated by financial intermediaries are insufficient to cater for the desired level of economic growth. The objective of this study is to find out how financial development has influenced the economy. Financial development was measured by money supply to GDP, insurance premiums to GDP, Stock market capitalization to GDP and private sector credit to GDP while economic growth was represented by real GDP. The study adopted the ex-post facto research design in conducting the research. The data was subjected to statistical analysis using the Ordinary Least Square regression. The findings of the study revealed that money supply to GDP and Market capitalization to GDP has positive and significant relationship with economic growth in Nigeria while private sector credit to GDP and insurance premiums to GDP ratio had negative relationship with economic growth in Nigeria. The study recommends that Credit to private sectors should be channeled to the real sector of the economy which will lead to economic growth .The monetary authorities should also ensure adequate supply of money to facilitate economic transactions for economic growth to desired levels, The monetary authorities should develop policies that aids entry of more establishments into the capital market and Insurance policies should be made to ensure the relevance and increased patronage of insurance sector in Nigeria

The Effect of Capital Market on Economic Growth in Nigeria (2000-2020)

This study examined the capital market and its impact on the Nigeria economy with emphasis on the stock exchange (2000-2020). Gross domestic product was used to proxy Nigeria economy while market capitalization, all share index, total number of deals on the Nigeria stock exchange and value of transaction on the Nigeria stock exchange were used as proxies for capital market. The Ex-post Facto research design was adopted in this study. Data on gross domestic product, all share index, total number of deals on the Nigeria stock exchange, market capitalization and value of transaction on the Nigeria stock exchange were obtained from the Central Bank of Nigeria (CBN) Statistical bulletin (2020). The data in this study was analyzed using the Ordinary Least Square regression method. The findings revealed that gross domestic product has a significant relationship on market capitalization, all share index, total number of deals on the Nigeria stock exchange and value of transaction on the Nigeria stock exchange. The researcher recommended that government should expand the technological based of the Nigerian capital market in order to further improve transactions and dealings, which could enhance internationalization and competitiveness of the market.

Foreign Portfolio Investment in India: Trends and Determinants

The present study analyzes the long-run and short-run relationship of foreign portfolio investments (FPI) with other explanatory variables. The study uses monthly data from January 2002 to July 2020. The autoregressive distributed lag (ARDL) technique is used to find the long run co-integration relationship of the model variables. The result obtained from error correction model shows that the model is stable and there by explains the integration of the long-run relationship of FPI with other variables. The results confirm to the fact that in the long run, IIP has a significant positive relationship with FPI inflows while the stock market capitalization has significant negative relationship. However, in the short-run we find that all variables have a significant relationship with FPI. Thus our study can be a guide to investors and the policy makers to predict the pattern of the foreign portfolio investment in India.

Analysis of the evolution and contradictions of hedge funds, their impact on stock markets

Subject. The article considers topical issues related to the formation and development trends of hedge funds and their impact on the stock market, based on extensive historical factual material. Objectives. The aim is to investigate the formation and evolution of hedge funds and their effect on financial and stock markets. Methods. The study rests on comparative analysis, the method of analogies, and statistical processing of actual and historical data on hedge funds and stock markets. Results. The analysis of data on the dynamics of capitalization of the world stock market and the world Gross Domestic Product confirmed the outstripping growth of financial and stock markets in relation to the real economy. The paper shows that assets managed by hedge funds have increased more than thirty times since 1998. The data on losses of hedge funds during the 2008 global crisis demonstrated that hedge funds failed to fully fulfill their task for which they were created, i.e. risk hedging. Conclusions. The main problems and contradictions of the activities of hedge funds are that they, having significant financial resources and advanced investment technologies for profit-making, can both stabilize and destabilize international financial and stock markets. The internal contradiction of hedge funds is that hedging risks requires the use of conservative investment strategies, and profit maximization necessitates investing in risk-taking stock assets.

The contribution of Shariah-Compliant products to SDGs attending through the pace of economic growth: an empirical evidence from Pakistan

PurposeSince 2004, Pakistan carried the banking sector under the umbrella of the Islamic financial paradigm, consequently the Islamic Banking Industry (IBI) placed an upright position in the banking and financial market of Pakistan. In this context, this study aims to analyze the effect of Shariah-compliant products of the IBI on the pace of economic growth in Pakistan.Design/methodology/approachThe data set covered 13 Pakistani Islamic banks comprising four full-fledged Islamic banks and 9 conventional banks holdings standalone Islamic Branches, for the period 2004–2019. Considering nature of the empirical model and data set, the estimation was carried out with the Pooled Ordinary least squares estimation technique.FindingsThe findings of the study reveal that Shariah-compliant products have a positive effect on the pace of economic growth. This indication is based on the fact that five out of six Shariah-compliant products hold positive signs and are statistically significant. In addition, the empirical evidence shows that at large conventional financial sector signifies its role in the Shariah-compliant products and pace of economic growth nexus. Among the control variables, foreign direct investment, human capital, trade openness, inflation and private credit pose negative, whereas money supply and stock market capitalization have a positive effect on the pace of economic growth in Pakistan. Findings of the study points towards the fact that Shariah-compliant financing has great potential to enhance the economic growth of Pakistan therefore to touch the sustainable development goals (SDGs).Practical implicationsHaving played a significant role in the growth process, Islamic bankers should portray a positive image of their industry to the government authorities. The government should design a public policy to encourage Islamic modes of finance at a macro level to increase the pace of economic growth and therefore SDGs realization.Originality/valueFindings of the study present new insight into the application of Shariah-compliant products of IBI toward the realization of SDGs in case of Pakistan.

The M&A Short-Term Wealth Effect of A Consistent Dividend-Paying Firm

AbstractThe paper examines the MA short-term wealth effect of a consistent dividend-paying firm. The consistent dividend-paying firm is unique because they are associated with lower agency problems. Hence, it is expected that the MA by the dividend-paying firm has a short-term positive wealth effect. To test the hypothesis, we perform two steps analysis. The event-study method examines the acquirer stock performance on the announcement date, the deal close date, and the announcement to deal close date. The cross-section regression to test the short-term wealth effect of MA by the dividend-paying firm. The dependent variable is the acquirer's stock performance from the event-study method. The independent variable is a dividend-paying firm. The control variables are the acquisition deal value relative to the acquirer's stock market capitalization, the acquirer's stock dividend yield, and the acquirer's price-to-book value (PBV) ratio. The samples are MA transactions in ASEAN-5 (Indonesia, Malaysia, The Philippines, Thailand, and Vietnam) for 2015-2019. The regression analysis shows that the variable representing a dividend- paying firm has a negative sign. The finding suggests that investors react negatively to the MA by the dividend-paying firm. The negative wealth effect is relatively small compared to the MA deal value and the acquirer's stock valuation. The result is that the MA by a dividend-paying firm provides a short-term positive wealth effect.JEL: G34, G35

Reputational risk on corporate corruption scandals: evidence from Latin America

PropósitoEste trabajo evalúa cómo los escándalos de corrupción afectan el riesgo reputacional corporativa en las principales empresas representativas de América Latina que cotizan en bolsa y su efecto en la hipótesis del mercado eficiente (EMH) en el índice Standard & Poors.Diseño/metodología/enfoquePrimero realizamos un estudio de eventos estándar para evaluar el impacto negativo de tales episodios de corrupción en términos de retornos anormales (AR) y retornos anormales negativos acumulativos (CAR). En segundo lugar, utilizamos la pérdida operativa derivada del escándalo de corrupción dividida por la capitalización bursátil (índice de pérdidas) para estimar los rendimientos anormales de reputación (RepAR) y su medida acumulativa (RepCAR).HallazgosLos resultados muestran que la reputación corporativa (CR) no afecta el desempeño bursátil de las empresas involucradas en los hechos de corrupción, al menos, en el corto plazo. Los resultados muestran RepCARs positivos debido a pérdidas aún desconocidas de efecto relativo de corrupción luego del anuncio del escándalo por parte de los stakeholders.Implicaciones prácticasEl comportamiento del mercado ante los escándalos de corrupción en América Latina nos debe permitir explorar otras opciones para penalizar sobornos, y el estudio de eventos con una perspectiva de EMH es parte de este trabajo.Implicaciones socialesLa corrupción se ha convertido en uno de los principales problemas en los últimos años en América Latina y esto afecta a los stakeholders.Originalidad/valorObservando en la literatura existente, no se encuentra estudios basados ​​en los escandalos de corrupción y precio de mercado utilizando metodología de eventos.

Influence of stock market factors on the natural resources dependence for environmental change: Evidence from China

The focus on sustainable development and a green perspective is increasing for minimizing the effects of resource depletion and pollution in the economies. China has been pushing green practices to remedy the damage to the environment it has contributed in the past. There is a direct association between the stock market trading activities and surplus of current accounts on the natural resources and green environmental practices. Thus, the present study was performed to study the relationship between the stock markets and natural resource dependency in China. This study extracted the data from the Statistical yearbook of China, World Banks, and Shanghai Stock Exchange from 1981 to 2020. The novel approach of the ARDL was used to study the long-run and short-run relationships between the stock market and the natural resource dependency of China. The data of the last four decades was employed to study the variation and association between the research variables. The ARDL bounds test informed of significant cointegration among the research variables. The estimation indicated direct associations between the stock market value traded and capitalization in the long-run and short-run. The stock market capitalization and value traded of the stocks in China represent significant affluence over the dependency on natural resources. This study presents a new vision for China to develop its economic and environmental policies.

The Mediation Effect of Country Risk in the Nexus Between Stock Market Development and Economic Growth: Evidence From Developing Countries

The aim of this paper was to investigate the mediation effects of a country’s (a) political risk (PR), (b) economic risk (ER), and (c) financial risk (FR) in the relationship between domestic stock market development (SMD) and economic growth (EG) in developing countries. SMD was measured: (a) once by total value of domestically-traded stock as a percentage of GDP (TVDTS/GDP), (b) once by stock market turnover ratio (SMTR), and (c) once by stock market capitalization as a percentage of GDP (SMC/GDP). EG was measured in terms of annual growth of real GDP (GDPG). PR, ER and FR were measured using the World Bank’s International Country Risk Guide’s political, economic and financial risk scales, respectively. Structural equation modeling was used to analyze panel data from 23 developing economies for the years 2007-2017. Our results revealed a significant positive indirect effect of TVDTS/GDP on GDPG through PR and FR, and a significant positive indirect effect of SMTR on GDPG through PR.

Dampak Pandemi Covid-19 Terhadap Pergerakan Pasar Modal di Indonesia

This study aims to find empirical evidence regarding differences in trading volume, trading frequency, and market capitalization in the movement of the Indonesian capital market before and after COVID-19. This research is quantitative with a cross-section method with different hypothesis tests using paired sample t-test. The population in this study is 48 companies that are members of the Indonesia Stock Exchange in semester 1 of 2019 and 2020 in the consumer goods industry sector, determined by the purposive sampling technique. This study's results indicate differences in the frequency of stock trading before and after the COVID-19 pandemic. However, there is no difference in trading volume before and after the COVID-19 pandemic. Then, there is also no difference in stock market capitalization before and after the COVID-19 pandemic.

The impact of stock market capitalisation, international investment, clean energy on CO2 emissions: New insight from listed domestic companies in Belgium

The paper fundamentally explores the impact of Belgium’s stock market capitalization, international investment, clean energy on CO2 emissions from 1990-to 2018. More pertinently, our study analogizes the diverse impact of Belgium’s stock market capitalization, international investment, clean energy, and environmental quality. Through cointegration analysis, stock market capitalization, international investment, clean energy, and environmental quality have long-run links. Granger causality test indicates that International investment has a unidirectional relationship with environmental quality; clean energy has a bi-directional relationship with environmental quality. Via the static and dynamic regression, we found that stock market development has the most significant impact on carbon dioxide emissions in static and dynamic regression. Renewable energy has a positive impact on the carbon dioxide emissions per static, and dynamic regression and economic growth harm environmental quality in Belgium. The impulse response function results show that the Stock market and international investment positively respond to environmental quality. Our empirical findings provide policies to advocate improving environmental quality in Belgium.

Causality between financial development, economic growth, and income inequality in EU countries

This study investigates the causality between financial development, economic growth, and income inequality using panel data for 23 European Union countries over the period 1987-2017. Various proxies of financial development are chosen to represent the depth, efficiency, and stability of the banking system and stock markets. For the empirical analysis, the study performs the Granger non-causality test in heterogeneous panels. The findings are contradictory and sensitive to the measures of financial development. Most importantly, the results reveal a one-way causality from financial development to economic growth when private credit, stock market capitalization, net margin interest rate, and Z-score are chosen as financial development indicators. In addition, a two-way causality exists between bank assets, liquid liabilities, non-performing loans, and economic growth, and a one-way causality from economic growth to value traded and turnover ratio. However, the results show no causality between stock price volatility and economic growth. The results indicate a one-way causality running from income inequality to economic growth. Finally, a one-way causality runs from income inequality to financial development for most measures of financial development except for a one-way causality running from private credit to income inequality, a two-way causality between bank assets and inequality, and an absence of causality between income inequality and turnover ratio, Z-score and stock price volatility.

ASSESSMENT OF NIGERIA STOCK MARKET DEVELOPMENT ON GROSS DOMESTIC PRODUCT

The study looked at the evolution of the Nigerian stock market from 1990 to 2020 to determine whether there was any correlation and how it could aid in economic development. Expost facto research was employed for this study. From 1990 through 2020, a sample of stock market capitalisation and GDP at year-end is chosen. Stock market turnover ratio and stock market value traded ratio versus GDP were employed as measures of stock market development in the study. The R-squared value (0.705770) suggests that the exogenous variables (Stock Market Value Traded Ratio (VTR) and Stock Market Turnover Ratio (TOVR) in the model explain 71 percent of the total fluctuations in Gross Domestic Product. The Fstatistic (6.853455) shows that the entire model correctly and significantly explains the phenomena. The evidence from the long-run regression estimate demonstrates that Gross Domestic Product has a considerable positive effect on the Stock Market Value Traded Ratio (VTR) and Stock Market Turnover Ratio (TOVR). The Nigerian stock market is hence illiquid and has a high transaction cost. Low liquidity means that investors will have a harder time converting their stocks to cash. It is recommended that, in order to improve liquidity, the cost of transactions in the Nigerian stock market and the methodology used to determine stock prices be reviewed, among other things, to make raising capital more affordable.

Stock market development and economic growth in sub-Saharan Africa (1990–2020): an ARDL approach

PurposeThe purpose of this paper is to investigate the short and long run causal relationship between stock market development and economic growth in sub-Saharan Africa within the period 1990 and 2020.Design/methodology/approachUsing panel data from 1990–2020 obtained from the World Bank development indicators, the study makes use of the autoregressive distributed lag model and the Granger causality and cointegration to analyze the long and short run causal relationship between stock market development and economic growth in sub-Saharan Africa.FindingsThe findings unveiled that stock market capitalization had a positive and significant effect on economic growth in the long run and a negative insignificant effect in the short run within the period of 1990–2020 while stock market liquidity measured through total value of shares traded and turnover ratio had a negative and significant effect on economic growth in sub-Saharan Africa within the period of 1990–2020. The Granger causality test showed an inconclusive result between stock market development and economic growth; implying that the authors cannot say if it is stock market development that causes economic growth or it is economic growth that causes stock market development within the period of 1990–2020.Practical implicationsThe findings suggest that governments of sub-Saharan African countries should encourage stock market development by implementing favorable rules for companies listing on their stock market, promote stock market integration with world markets to diversify risk, increase public awareness on stock markets, increase investors' confidence level and finally, remove stock market impediments like high taxes, legal and regulatory barriers to its development.Originality/valueThis study contributes to the existing literature by offering a whole new perspective on stock market development and economic growth since its conception in sub-Saharan Africa. Again, contrary to other papers, the study show how stock market development can contribute to the growth of sub-Saharan Africans’ economy.

Theoretical framework for analyzing the dynamics of the stock market and market capitalization of corporate agricultural enterprises

Analyzing and forecasting financial and stock markets is a strategic goal for investors, analysts, traders, underwriters, top managers of agricultural companies, and other stakeholders to manage the efficiency of both corporate and individual activities. At the same time, methods of modeling market capitalization dynamics differ depending on which institutional group of investors use them, which often leads to contradictory results. In this context, the problem arises of systematizing and improving the theoretical framework for analyzing corporate agricultural enterprises' market capitalization dynamics. The study aims to generalize and systematize the theoretical framework for analyzing the dynamics of the stock market and market capitalization of corporate agricultural enterprises. The study used the following methods: systematization, generalization, monographic analysis, and synthesis. The content of the theories of random expectations, efficient stock market, reflexivity in the stock market, chaos and fractal geometry of price movements, psychological moods of investors, and catastrophes have been summarized. It has been argued and proved that all theories and methodological approaches to analyzing stock market dynamics and market capitalization of corporate agricultural enterprises are dialectically related, are in constant development, and are ultimately aimed at identifying and explaining the patterns of the phenomena and processes under study. It has been shown that quantitative analysis is a methodological superstructure to qualitative analysis aimed at substantiating the identified laws and regularities in the dynamics of price quotations, stock market development, the behavior of investors and stock traders, and market capitalization of corporate issuers. These patterns subsequently become the basis for refining the theoretical and methodological foundations for analyzing the dynamics of the stock market and market capitalization of enterprises, as well as for launching adaptive training and retraining algorithms for neural networks and artificial intelligence systems. Keywords: stock market, market capitalization, equity, behavioural finance, finance theory, corporate agricultural enterprise.