In the company-financial markets relationship, a crucial role is played by economic-financial information, because the financial variables deriving from the balance sheet analysis reduce the information asymmetries between management and potential investors and improve market efficiency.The present study is conducted to examine the effect of some financial variables on market capitalization. The market capitalization is considered as a dependent variable, while six are the independent variables: Return on Equity, Return on Assets, Price/Earnings Ratio, Operating Income/Turnover per share, Earnings Yield and Working Capital per Share. 307 Italian listed companies are considered. The study period is 10 years: from 2008 to 2017.
This research, while noting that the variables considered are not decisive drivers of the market capitalization, outlines some important relationships: positive relationship between market capitalization and Price/Earnings Ratio, Operating income/Turnover per share and Working Capital per Share and negative relationship between market capitalization and ROE, ROA and Earnings Yield.
Abdolmohammadi, M. J. (2005). Intellectual capital disclosure and market capitalization. Journal of Intellectual Capital, 6(3), 397-416.
Al Mubarak, M. M. S. and Hamdan, A. M. M. (2016). The impact of corporate governance on market capitalization: evidence from Bahrain bourse. Corporate Ownership & Control, 13(3), 121-130.
Burge, G. (2014). The capitalization effects of school, residential, and commercial impact fees on undeveloped land values. Regional Science and Urban Economics, 44, 1-13.
Dias, A. (2013). Market Capitalization and Value-at-Risk. Journal of Banking & Finance, 37(12), 5248-5260.
Diéguez, A. I., González-Villegas, J.B. and Dolores Oliver-Alfonso, M. (2014). The Financial Performance of an Innovative Megaproject. Procedia. Social and Behavioral Sciences, 119, 417-426.
Ferrero, G. and Dezzani, F. (1979). Manuale delle analisi di bilancio. Indici e flussi. Milano, Giuffrè.
Graham, R. C. and King, R. D. (2013). Decision Usefulness of Whole-Asset Operating Lease Capitalizations. Advances in Accounting, 29(1), 60-73.
Hamdan, A., Al-Sartawi, A., and Jaber, R. (2013). The Effect of Corporate Governance on the Financial and Operational Performance and of Stock Performance in Kuwait Stock Exchange. Arab Journal of Administrative Sciences, 20(2), 255-302.
Jaya, M. and Sundar, K. (2012). A Study On The Relationship Of Market Capitalization And Macro Economic Factors (With Special Reference To Indian Information Technology Industry). Zenith International Journal Of Business Economics & Management Research, 2(11).
Kurihara, Y. (2006). The Relationship between Exchange Rate and Stock Prices during the Quantitative Easing Policy in Japan. International Journal of Business, 11, 375-386.
Kuwornu, J. and Victor, O. N. (2011). Analyzing the Effect of Macroeconomic Variables on Stock Market Returns: Evidence from Ghana. Journal of Economics and International Finance, 3(11), 605-615.
Mohammad, J. and Abdolmohammadi, M. (2005). Intellectual capital disclosure and market capitalization. Journal of Intellectual Capital, 6(3), 397-416.
Narayan, P. K., Mishra, S. and Narayan, S. (2011). Do market capitalization and stocks traded converge? New global evidence. Journal of Banking & Finance, 35(10), 2771-278.
Odogunde, A. O., Elumilade, D. O. and Asaolu, T. O. (2006). Stock Market Capitalization and Interest Rate in Nigeria: A Time Series Analysis. International Research Journal of Finance and Economics, 4, 154-166.
Onida, P. (1985). Economia d’azienda. Torino, Utet.
Pantea, M., Gligor, D. and Anis C. (2014). Economic Determinants of Romanian Firms’ Financial Performance. Procedia. Social and Behavioral Sciences, 124, 272-28.
Peles, Y. C. and Schneller M. I. (1982). Financial Ratios and The Analysis of Marketing Policy. European Journal of Marketing, 16(5), 12-21.
Prasetyantoko A. and Parmomo, R. (2008). Determinants of Corporate Performance Of Listed Companies In Indonesia. MPRA Paper.
Qurashi, M. and Zahoor, M. (2016). Impact of profitability, bank and macroeconomic factors on the market capitalization of the Middle Eastern banks. International Journal of Business and Management Invention, 5(11), 56-62.
Rad, A. A. (2011). Macroeconomic Variables and the Stock Market: Evidence from Iran. International Journal of Economic and Finance Studies, 3(1), 1-10.
Shobhana, V. K. and Karpagavalli, R. (2011). Determinants Of Market Price Of Shares Of The Select Banking Companies Listed On Bombay Stock Exchange. Academicia, 1(3), 8-25.
Simpson, J. L. and Evans, J. P. (2003). Banking Stock Returns and Their Relationship to Interest Rates and Exchange Rates: Australian Evidence. University of Wollongong, Dubai Working Paper,1-35.
Sultan, A. S. (2014). Financial Statements Analysis - Measurement of Performance and Profitability: Applied Study of Baghdad Soft-Drink Industry. Research Journal of Finance and Accounting, 5(4).
Tan, Y. and Floros, C. (2012). Bank profitability and inflation: the case of China. Journal of Economic
In-Text Citation: (Pavone, 2019)
To Cite this Article: Pavone, P. (2019). Market Capitalization and Financial Variables: Evidence from Italian Listed Companies. International Journal of Academic Research Business and Social Sciences, 9(3), 1356–1371.
Copyright: © 2019 The Author(s)
Published by Human Resource Management Academic Research Society (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode
