Mid-cap Companies Research Articles

Analysis of Option Prices Using Black Scholes Model

A mathematical formula used in finance to calculate the theoretical price of an option and ascertain its option premium is known as the Black Scholes option pricing model, which aids option traders in making informed decisions. This article estimates the option premium of various call and put options using the Black Scholes Model. The three distinct option chains chosen for this essay are all Mid-Cap companies that are listed on the Indian National Stock Exchange. The companies are Suzlon Energy, Kalyan jewellers India, and Exide Industries Ltd. The analysis demonstrates that the options are expensive because the Black Scholes model's computation of the option premium is lower than the actual premium in the market. Keywords: Option, Black Scholes Option Pricing Model, Call, Put, Option Premium

Regional and periodic asymmetries in the effect of Russia-Ukraine war on global stock markets

This study aims to investigate regional and periodic asymmetries in the impact of the outbreak of the Russia-Ukraine war on global equity markets. Employing the event study methodology, the current study examines global stock market reactions within a 61-day window centred around the event day, i.e., February 24, 2022. MSCI equity indices of 47 sample countries have been utilized to ensure uniformity in the index development methodology. They provide broader coverage of global equity markets by including large and mid-cap companies, representing approximately 85% of the free float-adjusted market capitalization for each sampled country. The study extends the event window to 61 days to assess the enduring effects of the war over a relatively longer period. The research delineates regional and periodic asymmetries and posits that the impact of the war on a market is contingent upon its geographical proximity and trade relations with Russia and Ukraine. Additionally, the impact is stronger during a shorter window surrounding the event date but diminishes over the extended period.

Indian Stock Markets’ Reaction to the Nationwide Lockdown due to COVID-19: Evidence from Event Study Analysis

Indian Stock Markets’ Reaction to the Nationwide Lockdown due to COVID-19: Evidence from Event Study Analysis

Women’s Participation in Firms’ Management and Their Impact on Financial Performance: Pre-COVID-19 and COVID-19 Period Evidence

At a time when gender equality is a key priority of all international organizations, this paper can be considered a remarkable contribution to the role of women executives in firms’ performance. More specifically, this study focuses on the effect of women holding positions of responsibility on firms’ performance worldwide. For the purposes of our research, we applied cross-sectional and panel data analysis for all sectors at an international level from 2019, the year preceding the breakout of the pandemic crisis, to 2021, while the indicators used to measure the participation of women in executive positions are classified as ESG indices. The empirical analysis findings end up showing that the participation of women in executive positions positively affects firms’ performance over time, while there is no material change observed before and during the COVID-19 pandemic period. More specifically, when the percent of women processing job positions of responsibility increases by 10%, then the index of profitability will increase from 1.4% to 1.8%, regardless of the measurement of female participation in executive positions used. The results of this study constitute a remarkable contribution to the promotion of the creative economy, the progress of societies, and sustainable development. The research’s outcome can be primarily used by policymakers drawing up policies for achieving gender equality in the labor market and workplaces and by shareholders and firms’ managers in order to trust females in executive positions in favor of their firms’ financial performance. The current study is unique in that it focuses on the period before and during the COVID-19 period, as a period of high volatility in economic activity worldwide, while the sample includes firms from large and mid-cap companies belonging to developed and emerging markets. The above approach will contribute to providing more credible information related to the role of women executives in firms’ performance.

Examining the superiority of the Sharpe single-index model of portfolio selection: A study of the Indian mid-cap sector

The purpose of the article was to examine the superiority and efficacy of Sharpe’s single-index model of portfolio optimisation. The study has attempted to build an optimal portfolio of Indian mid-cap companies using William Sharpe’s single-index model. The methodology is also known as the Market model. A portfolio was selected from the Nifty mid-cap 100 index of the NSE. MS-Excel 365 has been used for the analysis. The optimal portfolio returns during the fixed period of analysis were compared with the returns of the benchmark market portfolio. The return of the optimal portfolio using Sharpe’s model was found to be considerably higher than the benchmark market portfolio and the risk of the same was found to be much lower. Hence it could be established that in the five years of the study period, the optimal portfolio outperformed the benchmark market portfolio—the Nifty mid-cap 100 index. The selected optimal portfolio was also found to be well diversified comprising 11 securities and eight sectors. The limitation of this model is that it was based on historical data and hence, in case of extreme market conditions, the optimal portfolio could fail to give superior returns. Sharpe’s model resolves most of the technical difficulties of the earlier portfolio models and can very well be used by individual investors as well as portfolio managers worldwide to build optimal portfolios. The study has focussed on the mid-cap sector which is riskier than the large-cap sector. This is one of the first studies which has shown the efficacy of the single-index model for mid-cap companies in India.

A Study on Impact Corporate Social Responsibility on Profitability of Companies Listed in National Stock Exchange

The goal of this research is to investigate the various developments of CSR in India and to investigate the implementation of current CSR practises in India. This paper investigates how India's 30 largest corporations view, conduct, and identify the key CSR practises and financial performance. As stated in clause 135, there is still room for giving reasons if a company does not spend the required amount of CSR. Most companies can benefit from this, and they may also use CSR as a tool to increase their profit volume. As a result, it must be investigated. The current paper examines the practices and impact of CSR on profit given by companies in their annual reports & to meet the minimum ground of CSR expenditure. It is also intended to investigate the before-and-after effect of CSR provisions on sales volume, and in this respect, first correlation was sought and then correlation was used. For this study, a sample of 30 mid-cap companies listed on the NSE that are involved in the oil and gas, banking/finance, and automobile industries was chosen. The research is analytical in nature and is based on secondary data. Correlation and regression technique had been used to examine the relationship of CSR spent and the financial parameters like ROE and ROA.

A transformer-based model for default prediction in mid-cap corporate markets

In this paper, we study mid-cap companies, i.e. publicly traded companies with less than US$10 billion in market capitalisation. Using a large dataset of US mid-cap companies observed over 30 years, we look to predict the default probability term structure over the short to medium term and understand which data sources (i.e. fundamental, market or pricing data) contribute most to the default risk. Whereas existing methods typically require that data from different time periods are first aggregated and turned into cross-sectional features, we frame the problem as a multi-label panel data classification problem. To tackle it, we then employ transformer models, a state-of-the-art deep learning model emanating from the natural language processing domain. To make this approach suitable to the given credit risk setting, we use a loss function for multi-label classification, to deal with the term structure, and propose a multi-channel architecture with differential training that allows the model to use all input data efficiently. Our results show that the proposed deep learning architecture produces superior performance, resulting in a sizeable improvement in AUC (Area Under the receiver operating characteristic Curve) over traditional models. In order to interpret the model, we also demonstrate how to produce an importance ranking for the different data sources and their temporal relationships, using a Shapley approach for feature groups.

Portfolio Optimization using Single Index Model

The study here focuses on portfolio construction of mid cap companies, its optimization and throws up some important topics for further research. Issues discussed include the key inputs necessary to perform portfolio optimization, Markowitz Model, Single Index Model and the methods for evaluation of overvaluation and undervaluation of securities.

MID cap emerging companies and capital impact in stock market

Mid-cap companies are those with a market value between $2 billion and $10 billion. 1 The market capitalisation of a company is calculated by multiplying shareholders’ equity by the stock price. It is a well-known company with a great deal of potential for growth.ETFs that track midcap companies are another option. Fees for mutual funds are much higher. Because an ETF will never outperform the market, it has a downside. Consequently, they may keep an eye on the market. It's common for new investors to have a hard time deciding which stocks to buy. Even seasoned investors might be overwhelmed by these questions. If you're going to be a successful stock market investor, you need to have a good grasp of the fundamentals. You may suffer losses if you don't know which stocks to invest in. Stocks on the stock market are subject to inherent risk, which can vary greatly from one company to the next.

Factors Related to Small- and Mid-Capitalization Pharmaceutical Company Success Using Stock Performance as a Surrogate.

BackgroundDeveloping novel pharmaceuticals demands substantial investment despite high uncertainty of success and ultimate market value. While many established drug companies are highly profitable and have large portfolios of diversified assets, much of new drug innovation, a very high-risk, high-reward gambit, stems from smaller companies striving to bring their first products to market. While drug costs, and thus pharmaceutical company profits, can be controversial, it is unquestionable that the products from these companies provide great benefit to humanity. Hence, the ongoing success of the industry as a whole is quite relevant from a public health perspective.MethodologyWe sought to investigate factors influencing pharmaceutical company success using company stock performance on major US indices as a surrogate. As the profitability of large-capitalization (cap) pharmaceutical companies is well established, we focused on small- and mid-cap companies in this analysis. Small- and mid-cap pharmaceutical companies (both currently active and now defunct) and historical share prices were captured, including company details and the nature of drug pipelines. Funding by US academia was acquired via CMS.gov Open Payments and categorized into contributions < or ≥$100,000. Stock performance was considered good (+ ≥25%), mediocre (±25%), or poor (- ≥25%). Univariate and multivariate associations were assessed.ResultsOf the 420 companies included in the analysis, 101 (24%) had good, 76 (18%) mediocre, and 243 (58%) poor performance. The following were associated with performance in univariate analysis: initial public offering (IPO) price (P < 0.001), time from IPO (P < 0.001), number of drug programs (P = 0.019), and academic funding (P = 0.00013), with trend for diverse pipelines (both oncology and nononcology programs under development) (P = 0.069). On multivariate analysis, IPO price was inversely associated (P < 0.0001), while academic funding (P < 0.0001) and more drug programs (P = 0.0025) were positively associated with performance. Analysis of pharmaceutical IPOs since 2000 suggests a 20% rate of outright company failure.ConclusionsThe majority of included companies had lackluster stock performance, suggestive of low potential for drug development success and high probability of financial disaster. Robust drug pipelines and academic collaboration seem to be strongly related to company success.

Signaling Hypothesis and Size Anomaly in Indian Stock Market

The dividend signaling hypothesis means that dividend change announcements send signals to the market about its prospects. Market capitalization anomaly or size effect means small-cap stocks variances and returns are different than the large-cap stocks. The sample was tested for dividend change announcement, and the sample was divided into large, medium, and small sample sizes based on the market capitalization of the stocks to test the size effect. Event methodology market model used to calculate the abnormal returns on the dividend announcement day. We found that dividends send signals to the market, and the market reacts positively to the dividend change announcements on event day (Aharony and Swary 1980, Litzenberger and Ramaswamy 1982, Dhillon and Johnson 1994, Below and Johnson 1996), but results may vary with the size of the company. Small-cap companies&amp;#39; variances are higher than the large-cap and mid-cap companies, and also small-cap variances are not equal to other variances results similar to Wong (1989), Bandara and Samarakoon (2002), Sehgal and Tripathi (2006), and Switzer (2010). Finally, we concluded that the dividend signaling hypothesis and market capitalization or size effect anomaly exist in the Indian stock market

Impact of cash surplus on firm’s capital structure: validation of pecking order theory

PurposeBuilding on pecking order theory, this study seeks to understand the various financial factors that influence top management's decision regarding the company’s capital structure. The authors attempt to understand and analyse whether the capital structure of mid‐ and small‐cap firms is affected by cash surplus scaled to total assets. Along with other determinants of capital structure such as liquidity, profitability, tangibility, market capitalisation and age, this is considered one of the major factors. Cash surplus is calculated using data from the cash flow statement. It is defined as the difference in cash from operating activities and that from investing activities and is scaled to total assets. To the best of the authors’ knowledge, this is the first study to regress cash surplus scaled to total assets and other determinants over leverage to examine the impact on mid‐ and small‐cap firms. The pecking order theory was found to hold for firms earning cash surplus.Design/methodology/approachData were collected from the CMIE Prowess database of all firms listed on the NIFTY Small cap 250 index and NIFTY Midcap 150 index. The data of non-financial firms belonging to the midcap and small-cap sector, listed on the National Stock Exchange of India from 2012 to 2019 were considered. After cleaning the data, an unbalanced panel of 171 companies totalling 1,362 observations for the NIFTY Small-cap 250 index and another panel of 96 companies with 761 observations for the NIFTY Midcap 150 index was created. Panel data regression analysis was used to determine the effect of cash surplus scaled to total assets on the firms' capital structure.FindingsThis study demonstrates how small- and midcap firms' behave differently in taking capital structure decisions. Pecking order theory was found to hold for firms earning cash surplus as a proportion of total assets (Surplusta).Research limitations/implicationsThe study was conducted through data available on secondary sources and database. The study can be better conducted by conducting a primary survey too. Further study may be conducted with a blend of secondary and questionnaire method. The results can be compared to check the similarity in findings.Practical implicationsManagers can benefit from the findings when making decisions on long- and short-term loans. This study can help managers in terms of the financial variables that have a role to play in the financial leverage of the company. The decision of the managers of midcap or small-cap firms would be different. Factors influencing short- and long-term borrowings are different. Academics can discuss whether there is any difference in the influence of capital structure variables of small- and midcap companies and the reasons for such differences. Judicious decisions on capital structure will create wealth for the shareholders as the right decision about leverage would result in a proper cost of capital. The findings also add to the existing literature on the Pecking order theory.Social implicationsAcademics can discuss whether there is any difference in the influence of capital structure variables of small- and midcap companies and the reasons for such differences.Originality/valueThe study extends the existing literature by demonstrating that the capital structure of mid and small-cap firms is affected by cash surplus scaled to total assets. The pecking order theory was found to hold for firms earning cash surplus. This study can inform the practitioners about the financial variables that have a role to play in the company's financial leverage. As the results and significance of the variables of the midcap or small-cap firms are different, the decisions of the managers of these firms would be separate for the capital structure of their firms. The study also infers that the factors influencing short and long-term borrowings are different. The study determines whether managers' decision-making in such companies is different in terms of raising short- and long-term loans. The study attempts to guide managers in considering the different variables that would influence their capital structure decisions, particularly the decision to include debt in the capital. Financial variables need not be of equal importance for managers belonging to small- and midcap companies.

Managing the monetary and fiscal efforts to alleviate the turbulence from the COVID-19 crisis in the world and in our country

Data says that nearly 128 million people have been infected with COVID-19 and more than 2.5 million people have died worldwide. This has been further compounded by an economic crisis caused by the disease's disruption to the world economy, resulting in millions of people losing their livelihoods, exacerbating global poverty and inequality. The International Monetary Fund (IMF) estimates that the world economy, as measured by real gross domestic product (GDP), shrank by as much as 3.5% in 2020. The MSCI All Country World Index (ACWI), which tracks large- and mid-cap companies in 50 developed and emerging countries around the world, fell into a bear market during March 2020, and didn't pass its pre-COVID-19 high until late August. In response to this crisis, governments and central banks worldwide have enacted sweeping and sizable stimulus measures to counteract the disruption caused by the coronavirus and provide relief to those suffering from the pandemic. Did these measures work? What is the right way out of the crisis? How long will this turbulence last? How long will the consequences last? Some of these questions are subject to variable answers, and some of these questions have yet to be answered. The purpose of this paper is to compare the measures implemented by countries and identify the best way to manage them to achieve faster economic recovery. Methods of analysis, comparisons and statistical calculations were used to show the real picture of the current situation.

The effect of supply chain disruptions on shareholder wealth in small and mid-cap companies

PurposeSupply chain disruptions can have severe negative consequences on companies. However, studies measuring the financial impacts of supply chain disruptions are largely confined to developed nations and large companies. Therefore, this study aims to analyze the impact of supply chain disruption on small companies in the context of an emerging nation. Further, an attempt has been made to classify supply chain disruptions and measure its impact by its type.Design/methodology/approachIn this research, the event study on 335 supply chain disruption events for a 10 year period starting from 2009 to 2019 has been used.FindingsThe results state that the Indian small and medium companies lost −4.49% of shareholder wealth in disruption. The findings also indicate that the financial and environmental disruptions can have severe effect on shareholder wealth as compared to other category.Research limitations/implicationsThe study is confined to a developing country. Considering multiple countries can provide comparative results and therefore a global consensus could be achieved.Practical implicationsThe outcomes of the results help managers to plan and prioritize supply chain disruptions, regulatory authorities can plug any possible insider trading practices for small companies in the event of supply chain disruptions. Investors can plan and take prudent investing decisions based on the nature of the disruptions.Originality/valueTo the best of the knowledge, this is the first study measuring the supply chain disruption effects on smaller companies in an emerging nation. The study is also novel in incorporating financial disruptions and measuring source wise impact on shareholder wealth.

Factors related to drug pipeline success for oncology companies using stock performance as a surrogate.

e19405 Background: Developing oncology drugs demands substantial investment despite high uncertainty of success and ultimate market value. High drug costs have become subject to recent controversy. We sought to analyze factors influencing success in bringing new drugs to market using stock performance as a surrogate. Methods: Stock screeners and lists of initial public offerings (IPOs) captured small and mid-cap drug companies with share price ≥ $1.00 on major US indices. Share price was obtained from IPO to 03/09/2019. Company websites provided: headquarters (HQ) location, number/nature of drug programs (oncology vs. not, immunotherapy, gene editing, RNA-targeted, CAR-T). Funding to physicians and teaching hospitals (CMS funding) was acquired via CMS.gov Open Payments, and categorized into contributions &lt; or ≥ $100,000. Stock performance was considered good (+ ≥25%), average (+/- 25%), or poor (- ≥25%). Univariate and multivariate associations were assessed for all companies; a subset analysis included only oncology-focused companies. Results: 420 companies were included. 101 companies (24%) had good, 76 average (18%), and 243 poor (58%) performance. Associated with performance in univariate analysis: IPO price ( P &lt; 0.001), time from IPO ( P &lt; 0.001), number of drug programs ( P = 0.019), and CMS funding ( P = 0.00013), with a strong trend for diverse pipelines that included both oncology and non-oncology programs ( P = 0.069). On multivariable analysis, IPO price was inversely associated ( P &lt; 0.0001), while CMS funding ( P &lt; 0.0001) and greater number of drug programs ( P = 0.0025) were positively associated with performance. Within the sub-analysis of oncology companies, 178 were included. 44 (24.7%) had good, 30 (16.9%) average, and 104 (58.4%) poor performance. The following were associated with performance on univariate analysis: IPO price ( P &lt; 0.001), time from IPO ( P &lt; 0.001), HQ location ( P = 0.009), diverse pipelines (P = 0.016), and CMS funding ( P &lt; 0.001). On multivariable analysis, IPO price was inversely associated ( P &lt; 0.0001), while California HQ location ( P &lt; 0.01), diverse pipelines ( P = 0.028), and CMS funding ( P = 0.0002) were positively associated with performance. Conclusions: The majority of included companies had lackluster stock performance suggestive of low potential for drug success and high probability of financial disaster during development. Diverse pipelines and academic collaboration seem to be strongly related to success. This is the first study to demonstrate association between CMS funding and pharmaceutical stock performance.

Dividend Signaling Hypothesis, Semi-strong form of Hypothesis and Market Capitalization Anomaly in Indian Stock Market

The dividend signaling hypothesis means that dividend change announcements send signals to the market about its prospects. Market capitalization anomaly or size effect means small-cap stocks variances and returns are different than the large-cap stocks. The sample was tested for dividend change announcement, and the sample was divided into large, medium, and small sample sizes based on the market capitalization of the stocks to test the size effect. Event methodology market model used to calculate the abnormal returns on the dividend announcement day. We found that dividends send signals to the market, and the market reacts positively to the dividend change announcements on event day (Aharony and Swary 1980, Litzenberger and Ramaswamy 1982, Dhillon and Johnson 1994, Below and Johnson 1996), but results may vary with the size of the company. Small-cap companies' variances are higher than the large-cap and mid-cap companies, and also small-cap variances are not equal to other variances results similar to Wong (1989), Bandara and Samarakoon (2002), Sehgal and Tripathi (2006), and Switzer (2010). Finally, we concluded that the dividend signaling hypothesis and market capitalization or size effect anomaly exist in the Indian stock market

Компании малой и средней капитализации на российском фондовом рынке: возможности, условия, перспективы развития

Компании малой и средней капитализации на российском фондовом рынке: возможности, условия, перспективы развития

A profession in change: Chief financial officers’ characteristics and backgrounds in large German companies

Growing competition, increasing uncertainty, globalization, and deregulation made the nature of what companies do increasingly complex, and especially corporate accounting has become more and more important. This has put chief financial officers (CFOs) on the spot and into a key leading position. This paper commences by briefly reviewing extant empirical findings on CFO characteristics and their effects on firm processes and outcomes. Then, it investigates how the profession of the CFO has changed over time by analyzing changes in demographic characteristics and professional backgrounds of CFOs of German DAX companies over the past 20 years. The findings show changes in the CFO profession specifically with regard to CFO appointment age, professional experience (i.e., breadth of non-company and non-industry lifers, hiring of company and industry outsiders), and educational background (i.e., the role of educational level). Furthermore, the results for DAX CFOs are compared to data pertaining to the CFOs of midcap companies (i.e., MDAX). The respective analyses indicate a noticeable difference with regard to appointment age, professional experience (i.e., work experience, percentage of company-lifers, international experience), and educational level.

Creating Value in Small-cap Firms by Mitigating Risks of Market Volatility

Extant research has explored numerous ideal approaches to predict and anticipate the unpredictability in stocks to mitigate business risks. This article attempts to offer an important insight on creating values in terms of financial returns dodging the risks associated with the market volatility in emerging market economies by exploring the context of National Stock Exchange (NSE), India. The study establishes that Small-cap companies, which are included in NSE Small 100 index, are less inclined to be impacted by the market volatility index (NVIX) compared to the Large-cap companies and Mid-cap companies that are under respective Broad Market Indices. Furthermore, this article examines 64 Small-cap companies, belonging to nine different sectors, to investigate the sector-wise impact of market volatility on Small-cap businesses in India.

Transparency among S&P 500 companies: an analysis of ESG disclosure scores

PurposeThe purpose of this paper is to explore the state of S&P 500 companies’ transparency by analyzing their Bloomberg ESG (Environmental-Social-Governance) disclosure scores. Additionally, the effects of industry sector, firm size, and governance practices on transparency are examined.Design/methodology/approachData were retrieved from Bloomberg using the financial analysis environmental, social and governance function for companies comprising the S&P 500 index. Descriptive statistics are provided on each of the three components separately (ESG). Nonparametric procedures are used to test for significant differences in transparency within each of these three areas based on industry sector. Additionally, nonparametric tests are used to determine the impact of firm size (market capitalization) and governance factors (board size, board gender diversity, chief executive officer (CEO) duality, and linking executive compensation to ESG disclosure) on the composite ESG score.FindingsDescriptive statistics reveal that S&P 500 companies differ in their level of disclosure across the three areas (ESG). The highest level of transparency is found on Governance and the lowest on Environmental. Moreover, there is much variability in the percentage of S&P 500 companies disclosing information about specific Social policies (e.g. child labor). Significant differences in transparency on both the Social and Governance dimensions are found between certain industry sectors. The results also reveal that large-cap companies have significantly higher ESG disclosure scores than mid-cap companies and that governance factors impact ESG disclosure. Significantly, higher ESG disclosure scores are observed for S&P 500 firms with larger boards of directors, with boards that are more gender diverse, that allow CEO duality, and that link executive compensation to ESG scores.Originality/valueThis study focuses on corporate transparency through a granular analysis of ESG disclosure scores when most other studies have been primarily conducted at the macro level. Stakeholders, analysts, and shareholders are increasingly scrutinizing firms’ sustainability disclosures in their assessment of management quality, as it reflects on the practices/policies that are employed to improve firms’ environmental and social footprints.