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Assessing the impact of investors' expectations on the capitalization of publicly-traded corporations on the Russia stock market

Vol. 27, Iss. 10, OCTOBER 2021

Received: 14 July 2021

Received in revised form: 16 August 2021

Accepted: 30 August 2021

Available online: 29 October 2021

Subject Heading: BUSINESS VALUE

JEL Classification: G12, G17, G32

Pages: 2328–2348

https://doi.org/10.24891/fc.27.10.2328

Anastasiya O. VOLODINA State University of Management (SUM), Moscow, Russian Federation
ao_volodina@guu.ru

https://orcid.org/0000-0003-3466-8212

Subject. This article investigates the impact of investors' expectations on the capitalization of publicly-traded corporations of Russia stock market.
Objectives. The purpose is to assess the impact of investors' expectations on the capitalization of corporations that are publicly traded on the Russian stock market, to expand tools for assessing the expected return of investors.
Methods. The study employs models for assessing the profitability of financial assets, namely, Capital Asset Pricing Model (CAPM) and modified CAPM, as well as general scientific and statistical methods for analyzing economic processes.
Results. Using the CAPM, I determined expected profitability of twenty Russian publicly-traded companies, operating in the electric energy, oil and gas, and metallurgical sectors of the economy, and assessed the model’s effectiveness. Based on the tools of correlation and regression analysis, I estimated the impact of expected return of investors on changes in company capitalization. The paper reveals the relationship between investors' expectations and changes in the capitalization of Russian corporations.
Conclusions. The modified model showed higher forecast efficiency compared to the classical model. There is a strong correlation between expectations of investors, determined under the modified model, and changes in Russian corporations’ capitalization. This enables the company management to influence the market value of the enterprise. The findings may be useful for investors, to enhance the forecast accuracy and make appropriate investment decisions, and for corporate management, to assess the value of company's equity capital, forecast the movement of stock prices, and influence the company's capitalization through the proposed model.

Keywords: corporate capitalization, financial asset, investor expectations, market value, cash flow

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