Corporate cross-ownership and market aggregates: Oslo stock exchange 1980–1990
1994; Elsevier BV; Volume: 18; Issue: 4 Linguagem: Inglês
10.1016/0378-4266(94)00015-8
ISSN1872-6372
Autores Tópico(s)Financial Reporting and Valuation Research
ResumoAbstract Corporate cross-ownership results in double counting of assets in the market's valuation of total equity. This paper is the first to use firm-specific data to measure the resulting bias in market capitalization, market portfolio return, capital structure, and the P/E ratio. Based on the population of firms on the Oslo Stock Exchange, we found substantial distortions of market aggregates: The average size of the equity market was overstated by 20%, financial leverage was underestimated by 7%, and the market portfolio return was underestimated by 31%. Double counted earnings offset the bias in market capitalization, leaving the P/E almost undistorted.
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