Tobin’s Q of Honda Motor Company, Limited and its Determinants from 2013 to 2017

Abstract

A firm’s market capitalization can be influenced by internal or external factors. This may be caused by and linked to corporate governance failures and the changes of macroeconomic factors. This paper attempted to investigate the internal determinants (corporate governance index, return on assets, return on equity, Altman Z) and external determinants (gross domestic product, unemployment rates and exchange rate) of Tobin’s Q and how they influence Tobin’s Q of Honda Motor Company, Limited from 2013 to 2017. The importance of corporate governance will also be delivered indirectly in this study. Ordinary Least Square analysis (OLS) was used to study the significance of independent variables towards Tobin’s Q. The findings showed that Altman Z (internal determinant) was positively significant to the Tobin’s Q ratio and influenced Tobin’s Q the most. This study also suggested the firm to focus on its corporate governance principle, which is transparency to avoid bankruptcy.