Alternative constructions of Tobin's q: An empirical comparison

Perfect, Steven B.; Wiles, Kenneth W.

doi:10.1016/0927-5398(94)90007-8

Cited by 363 publications

(218 citation statements)

References 9 publications

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“…Our methodology for constructing market value of the firm closely follows Perfect and Wiles (1994), Lewellen and Badrinath (1997), Allayannis and Weston (2001). According to Perfect and Wiles (1994), market value of a firm in year t is the sum of year-end market values of equity, debt, and preferred stock.…”

Section: Appendix Dmentioning

confidence: 99%

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Policy uncertainty, derivatives use, and firm-level FDI

2017

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We explore the link between uncertainty in economic policy, firm-level FDI, and firm hedging behavior -building upon a newspaper-based index of economic policy uncertainty (EPU). We find that the relative difference in EPU between home and host country has a significant relationship with FDI. Firms increase their FDI level in countries, which have a low level of EPU relative to their home country. In addition, firms use derivatives more intensively in response to an increase in EPU. Interestingly, the link between EPU and corporate derivatives use varies according to the type of firm. Domestic MNCs make the most effective use of derivatives to hedge against EPU exposure. Journal of International Business Studies (2018) 49, 96-126.

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Section: Appendix Dmentioning

confidence: 99%

“…In this method of accounting, the last items placed into the firm's inventory are supposed to be the first ones sold (see Perfect &Wiles, 1994 There are two main reasons why we chose large firms. Firstly, large firms were more likely to be involved in international business activities and thereby have exposure to financial risks.…”

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confidence: 99%

Policy uncertainty, derivatives use, and firm-level FDI

2017

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“…We measure Tobin's q as the value of the firm divided by the book value of total assets, and use it as an independent variable because it provides a measure of the firm's intangible assets (Perfect and Wiles, 1994). Further, the goodwill literature has used Tobin's q as a proxy for the investment opportunity set, which is documented as being associated with goodwill amortisation/impairment loss (Bradbury et al, 2003;Chalmers et al, 2011).…”

Section: Alternative Variables and Modelsmentioning

confidence: 99%

The role of corporate governance in accounting discretion under IFRS: Goodwill impairment in Australia

Kabir

Rahman

2016

Journal of Contemporary Accounting & Economics

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A major concern with the adoption of International Financial Reporting Standards (IFRS) is the accounting discretion allowed under the IFRS, and its potential opportunistic use by managers. We examine the role of corporate governance in the accounting discretion inherent in goodwill impairment decisions under the IFRS. More specifically, we investigate whether, in Australia, stronger governance strengthens associations between economic factors and goodwill impairment loss but weakens associations between contracting incentives and goodwill impairment loss. Using data from 2007 to 2012, we find evidence consistent with the notion that stronger governance enhances the associations between economic factors and goodwill impairment loss. However, we find that strong governance cannot completely eliminate the opportunistic use of discretion in an impairment decision, especially when pre-impairment income is negative, and when the impairment occurs in the first year of a CEO's tenure. Our results are robust with regards to alternative measures of the dependent variable, firm performance variables, and the governance variable, even after controlling for potential self-selection biases.JEL Classification: G34, M41

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“…Tobin's Q is proxied by book value of total assets plus market value of equity minus book value of equity divided by book value of total assets (Cheng and Pruitt, 1994;and Perfect and Wiles, 1994). Share return is the annual share return over the 12 months preceding the financial year end.…”

Section: Datamentioning

confidence: 99%

The impact of board size on firm performance: evidence from the UK

Guest

2009

The European Journal of Finance

626

478

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We examine the impact of board size on firm performance for a large sample of 2,746 UK listed firms over . The UK provides an interesting institutional setting, because UK boards play a weak monitoring role and therefore any negative effect of large board size is likely to reflect the malfunction of the board's advisory rather than monitoring role. We find that board size has a strong negative impact on profitability, Tobin's Q and share returns. This result is robust across econometric models that control for different types of endogeneity. We find no evidence that firm characteristics that determine board size in the UK lead to a more positive board size -firm performance relation. In contrast, we find that the negative relation is strongest for large firms, which tend to have larger boards. Overall, our evidence supports the argument that problems of poor communication and decision-making undermine the effectiveness of large boards.

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Alternative constructions of Tobin's q: An empirical comparison

Cited by 363 publications

References 9 publications

Policy uncertainty, derivatives use, and firm-level FDI

Policy uncertainty, derivatives use, and firm-level FDI

The role of corporate governance in accounting discretion under IFRS: Goodwill impairment in Australia

The impact of board size on firm performance: evidence from the UK

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