Abstract
ABSTRACT We examine the relation between Tobin’s Q and firm performance among Japanese firms after the 1990 burst of asset prices bubble in Japan. We find that Tobin’s Q and change in q calculated in the base-year of 1989 is effectively a good indicator of future performance of firms in the areas of profitability, efficiency and growth. The results of the efficacy of q are robust when compared with those from performance metric such as market-adjusted returns and raw stock price returns. The results are also robust when apply to the Singapore firms. The result is applicable to the current world economic decline in 2008. Keywords Tobin’s Q, firm performance, firm quality, Japan, Singapore
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