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Do share prices matter?
Author(s) -
Dyl Edward A.,
Elliott William B.,
Handley John C.
Publication year - 2002
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/1467-629x.00075
Subject(s) - shareholder , share price , monetary economics , stock (firearms) , economics , sample (material) , financial economics , capital market , stock price , stock market , large sample , business , stock exchange , finance , corporate governance , mechanical engineering , chemistry , chromatography , engineering , paleontology , statistics , mathematics , horse , series (stratigraphy) , biology
This paper examines whether the cross sectional variation in Australian share prices is partially explained by measures of firm size and ownership characteristics in a manner that is consistent with firms behaving in accordance with Merton’s (1987) model of capital market equilibrium with incomplete information. Based on a sample of firms whose shares were traded on the ASX during 1995, we show that firms largely owned by less wealthy shareholders tend to have low stock prices, although this relation is not linear. In addition, larger, better–known, firms tend to have higher stock prices. These findings are consistent with prior evidence from US markets, and suggest the existence of a shareholder clientele effect in Australia that is related to the share price of the underlying firm.