Analysis of factors that influence the companies’ market value in England, France, and Germany. How can managers maximize such value?

Abstract

One of the classic issues in business administration is whether managers can maximize profit. Thus, this article aims to identify the causal factors regarding the maximization of companies’ market value to subsidize decision-makers. The sample was extracted from the Capital IQ database and formed of nonfinancial public companies from Germany, France, and England, considering the period from 1999 to 2019, with quarterly frequency. The study finds theoretical support from market-to-book decomposition concepts as in Rhodes-Kropf, Robinson, and Viswanathan (2005), and uses the classical theory decision model with hypotheses proposed by Lindenberg and Ross (1981), Hirschey and Wirchem (1984), Habib and Ljungqvist (2005), Hertzel and Li (2010), and Belenzon (2012). The research adopted a t-1 period lag in the independent variables in relation to the dependent variable to demonstrate the result of actions of independent variables in the dependent variable in subsequent periods. Subsequently, correlation and regression analyses were performed with panel data. The results show that the management of tangible and intangible assets, goodwill, revenue, Ebitda, return on assets, research and development, advertising, Capex, and return on equity contribute to increasing the companies’ market value, and they can be maximized through good management. Therefore, because these variables are manageable, it is possible to infer that managers are in the position to maximize companies’ market value.