Panel Data Approach of the Firm’s Value Determinants: Evidence from the Jordanian Industrial Firms

Imad Zeyad Ramadan

doi:10.5539/mas.v10n5p163

Abstract

<p class="zhengwen">This study aimed to investigate the main determinants of the industrial firms' value in developing countries namely Jordan. To achieve this goal all 77 ASE listed industrial firms for the period from 2000 to 2014 were utilized resulting in 974 firm-year observations. Twelve firm specific variables, namely, firm's size; firm's age; firm's risk level; firm's sales revenue; firm's operating cost; firm's tax rate; firm's net margin; firm's capital expenditure; firm's book value; firm's earning per share; firm's dividend per share and firm's pay-out ratio, were tested as a possible determinates of the firm's value. After testing for Multicollinearity and Heteroscedasticity the result of the unbalanced panel data Multi-regression model approach shows that the joint effect of the twelve potential determinants interprets about 37% of the variation in the value of the Jordanian industrial firms listed at ASE (R-squares = 0.3682), therefore, firm's in developing countries like Jordan should concentrate on these specific variables of the firms in order to improve the value and thus the wealth of the shareholders<strong>. </strong></p>Another finding of the study is that the firm's risk level and tax rate are not statistically significant drivers of the Jordanian industrial firm's value. The findings of the effect of firm's risk level and tax rate on the firm's value were contrary with Tiwari Ranjit et al (2015) and Rappaport (1998) respectively.

Highlights

Fund is considered as one of the most significant limited resources .In order to have these sources, firms shall market their selves on the investors individuals who are considered as net supplier of funds,and within this context firms have the ability to create the value and increase the wealth of stakeholders.Companies are considered favorable by investors, and if the firm was able to specify the variables that have a significant impact on the market value of the firm, it can positively affect shareholders’ wealth through efficient management of these variables
To achieve the goals of the study, the null hypothesis that the study seeks to test can be formulated as follows: H : There is no statistically significant joint effect of the potential determinants on the Jordanian industrial firms' value listed at Amman Stock Exchange (ASE)
The results show that the joint impact of the twelve potential determinants interpret about 37% of the variation in the value of the Jordanian industrial firms listed at ASE as the Adj

Summary

Introduction

Companies are considered favorable by investors, and if the firm was able to specify the variables that have a significant impact on the market value of the firm, it can positively affect shareholders’ wealth through efficient management of these variables. This result is consistent with the view that the priority of corporate managers is to maximize the wealth of stakeholders (Rappaport (1986), Black et al (2001), Chandra (2011). But there is no consensus so far on these determinants nor the nature of its impact on firms, in addition to that the empirical research on developing countries are few when compared to the developed countries what highlights the importance of the current study from being an attempt to bridge the gap in research on the determinants of the firms value in developing countries, Jordan

Objectives

Methods

Results

Conclusion