This study presents a new approach to the question of world capital market integration by focusing on firm values, instead of stock returns. Based on firm value measuressuch as price/cash flow, price/earnings and Tobin’s Qfor firms from seven major industrial countries over the 1998-2002 period, we examine the relative importance of country, industry, year and firm effects in explaining the variation of firm values. Our variance component analysis finds that country effects are rather tiny, but industry effects are sizable, which suggests that comparable firms (i.e., firms in the same industry) tend to have similar valuations even when they are traded in different countries. We also find that industry effects are especially large for a sample of multinationals or a sample of largest firms. Finally, we find that the convergence in firm values across countries appears stronger than the convergence in firms’ operational
performance across countries, suggesting that the integration of world capital markets may be stronger than the integration of world product markets. Our results generally support the view that the extent of world capital market integration is substantial.
Key words: capital market integration, firm values, variance components
학회 소식
공지사항
[2005년 제 2차] A New Approach to Evaluating the Extent of World Ca
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게시일 :
2005-06-03