dissertation

[DennisM]

Hello,

I'm currently working on a dissertation about the influence of voluntary disclosure on firm value of belgian listed companies. I am using Tobin's Q as my dependent variable. In prior research, Tobin's Q was defined as the market value of a company devived by its replacement costs of assets. In my research, i am using a different calcutation. I use:

market value of equity + book value of debts
------------------------------------------------------------------------
book value of equity + book value of debts

I was wondering how i can correctly interpretate this formula? I know the interpretation of the normal Tobin's Q but this is definately not the same ofcourse. Why is the market value higher? Why do u guys think Tobin's Q is a good measure for firm value?



Thanks!

 

[chinweike]

Hi DennisM,
I do not believe that Tobin Q method gives a better value of a company. It basically entail challenging market price with market information. It will keep going in circle. Have you considered using the Residual Earnings Method? The inputs are not based on what you set out to challenge..
Best of luck in your research.