HOW CAPITAL STRUCTURE AND PRICE RATIOS AFFECT THE MARKET CAPITALIZATION AFTER FINANCIAL CRISIS

In this paper, we applied the Ohlson (1995) valuation model to evaluate the marketcapitalization of Toronto Stock Exchange-listed companies. The project focused on therelationship within the period after the financial crisis in 2007. Therefore, data werelimited from 2010 to 2016. We split the enterprise value into assets and liabilities basedon the theory proposed by Giner & Reverte (2001). With assuming different assetsclasses could influence a company’s market capitalization to different extents, weconducted our stage two analysis by breaking assets into current and non-current assets.We also attempted to use price-to-book ratios as a replacement for market capitalizationand formulated a multi-factor regression model using ratios in our stage three analysis.The results turned out that the Ohlson valuation model has the highest power ofexplanation, and some further research could be done to improve the model.