Measure Of Market Value Research Articles

The Role of Intellectual Capital in Firms’ Performance and Market Value: Evidence from Jordan

The purpose of this study is to examine the association between intellectual capital efficiency and firms’ financial performance and market value. The study employs the value-added intellectual coefficient (VAIC) model to measure intellectual capital efficiency. This model consists of three elements: human capital efficiency, structural capital efficiency, and capital employed efficiency. The study uses the return on assets (ROA) ratio to measure firms' financial performance and the market-to-book value (MBV) ratio as a measure of market value. Data for a sample of 113 manufacturing and service companies listed on the Amman Stock Exchange for 2014 to 2018 were analyzed using multiple regression analysis. The results indicate that VAIC has a significant positive relationship with a firm’s financial performance, while it is unrelated to a firm’s market value. Human and structural capital also have a positive influence on financial performance, but they have no relationship with market valuation. Capital employed is positively related to both financial performance and market value. The findings of this study would enable companies to better understand the role of intellectual capital in adding value for all stakeholders of the company. They may also bring standard setters’ attention to the need for recognizing or disclosing intellectual capital either quantitatively or qualitatively within the accounting financial reports, which may have the potential to increase the credibility of financial reporting.

Chinese Defense Industry Reforms and Military Firm Performance: Evidence from the Civil—Military Integration Strategy

ABSTRACT In March 2015, the Chinese government initiated an important reform program targeting the defense industry, namely civil–military integration (CMI), with the objectives of introducing military technologies to the civilian market and infusing private capital into military enterprises. On examining this unique exogenous shock in a 2007-2017 sample of Chinese A-share listed firms, we identify the following effects of CMI on military firms’ performance. (1) The market value of military firms significantly increases after the establishment of the CMI policy in 2015 and the market value of military firms is on average 6.682% higher after 2015. (2) This effect is robust to propensity score matching, instrumental regression, alternative measures of corporate market value. (3) The positive impact of CMI on military listed firms’ market value is stronger for firms with lower innovation ability and weaker corporate governance, suggesting that the CMI policy can improve the research and development abilities and ease the agency conflicts of military firms. (4) After 2015, military firms with weaker financial constraints and those located in provinces with lower marketization levels perform better. Overall, offering a micro-perspective on military firms, this paper complements the growing literature on defense economics and clarifies how CMI improves military firms’ performance.

The Role of Initial Return to Market Value and Entrepreneur Ownership in Indonesia

Initial pricing is done through negotiations, the company sets the offering price to achieve success in its IPO process. The difference in the ratio between the opening and closing prices is an initial return that can provide capital gains for shareholders. The gap between informed and uninformed investors makes stock prices a measure of market value for investors. The specific purpose of this research was conducted to determine the of the proportion of share ownership by entrepreneur ownership on the market value of equity and on the initial return. In addition, to determine the direct effect of the initial rate of return on market equity. As well as the effect of Initial Return in mediating the relationship between entrepreneur ownership and market value of equity. This research method is quantitative, with purposive sampling technique. While the data collection method used is a survey. The object of this research consisted of 228 companies that did their first listing for the 2008-2017 period on the Indonesia Stock Exchange. This study uses a simple linear regression analysis by doing the correlation test, F test, and t-test. The results of this research describe that all regression relationships have p values which are below the significance level of 0.05. Meanwhile, the findings on the role of initial return as a mediating variable made the value of the coefficient B decrease from 1.103 to 0.095. Thus it can be concluded that all hypotheses are supported with a significant and positive influence. On the effect of initial return in the relationship between entrepreneur ownership and market value, it has a significant effect with a partially mediating role.

Corporate governance and firm performance: empirical evidence from Pakistan

PurposeThe purpose of this research is to look into the governance–performance relationship in the context of critical firm characteristics, such as firm size.Design/methodology/approachBased on total assets, sample firms were classified as small or large. The governance index, which is based on 29 governance provisions covering the audit committee, board committee, ownership and compensation structure of the respective firm, measures governance quality among sample firms. A higher governance index indicates a higher level of governance quality and vice versa. Accounting and market value measures are used to determine firm profitability. The authors used the two-stage least square (2SLS) method of estimation of the model to eliminate the simultaneous equation bias.FindingsCorporate governance (CG) appears to have a positive impact on accounting return and market indices (Tobin’s Q), but it has little impact on return on equity. In terms of firm size, larger companies profited more from better governance implementation than smaller firms that lacked these principles, thus improving CG. The findings indicate that small businesses should improve their governance mechanisms to reap the benefits of CG in terms of increased profitability.Research limitations/implicationsThere are certain drawbacks to this research. First, the authors omitted qualitative aspects of CG from the CG index, such as the board’s decision-making process, directors’ perceptions of the board’s position and directors’ age and qualifications. Such a qualitative component will improve the governance index in the future while building the governance index. Second, as the current study only looks at the nonfinancial sector, caution should be exercised before applying the findings to the entire population.Practical implicationsThe findings show that companies that follow good governance standards have better accounting and market efficiency than those that do not. As a result, good governance practices can help firms in developing countries improve their performance. Academic researchers, regulators, investors, lenders and practitioners can find the findings useful in establishing a true relationship between firm performance and CG practices in Pakistan.Originality/valueThe relationship between governance and profitability in the context of firm size is examined in this research. Firms with varying resources and ability to implement CG codes have varying effects on profitability. To the authors’ knowledge, there was a gap in the literature that addressed this topic in the local context.

To Diversify or Not to Diversify? – Questioning the Diversification Discount in Germany

The decision to realign a company through diversification is highly relevant not only for the board and corporate development functions but also for shareholders and other stakeholders. In research and practice, the diversification of risk and return is always considered against the background of effects on stock market valuation. In this context, the question of the extent to which diversified companies are better or worse valued by the capital market has to be answered time and again. Against this background, this study examines the effects of diversification on capital market valuations using German data. Although the fact that conglomerates trade at a discount seems to be common knowledge, the results for the German market are ambiguous and outdated. Using a 2SLS approach, our study confirms the existence of a conglomerate discount, which ranges from 6.3% to 14% depending on the measure of market value. However, we find that this discount is not caused by diversification but by the factors that affect the propensity to diversify.

Financial Analysis of Hilton Holdings

The Financial analysis of Hilton Worldwide Holdings Inc. has been conducted. The data was taken for the five years including 2021, 2020, 2019, 2018, and 2017. The data were gathered from the financial statements of the company. After gathering the data, methodology was set for the financial analysis of Hilton. The financial analysis was done due to ratios including Liquidity ratios, Leverage Ratios for Hilton, Asset Management (AM) Ratios, Profitability Ratios, and Market Value Measures. The status was then analyzed after the result of each ratio for the five years. It showed the performance of the company and its financial status in comparison with the other hotels in the market. There were loopholes found which need to be overcome soon by Hilton to stabilize the revenue. The impacts of COVID-19 on the Hilton and other hotel industries were discussed and suggestions were given for the stability of the economy through different surveys conducted in the world. Hilton shows a loss in recent years, but this loss was due to some circumstances, which compelled the company to incur a loss. The status of the company is improving, and it will grow again because the reasons due to which the company incurred a loss are solving. The company has good prospects therefore the investor's recommendations mentioned that the investor should invest in the industry because it will again increase the share price in near future.

On the relationship between intellectual capital efficiency and firm value: evidence from the Nigerian oil and gas downstream sector

We use a multi-theory framework which combines the lenses of clean surplus theory, resource-based theory and stakeholder theory to examine the relationship between measures of intellectual capital efficiency and firm market value. We employ Prais-Winsten regression with panel corrected standard errors to estimate our model. We find that while capital employed and structural capital efficiencies significantly and positively determine firm value, relational capital efficiency's positive effect appears mild. However, human capital efficiency appears to have no relationship with firm value. The significance of our findings is demonstrated by two key contributions to the literature. Firstly, this study is the first of its kind conducted in the Nigerian oil and gas industry. Secondly, our results provide further evidence in support of the clean surplus theory in its function of facilitating the role of accounting numbers in determining and explaining market values. These results are robust to an alternative time-series estimation at aggregate downstream sector level.

Earning information content changes based on accrual measures and quality measures: Evidences from member countries of Asia Pacific trade agreement

AbstractThe primary purpose of the study to identify the impact of accruals measures and quality measures on the earning information content that effects market value, while keeping in view the measures of Dechow, Sloan, and Sweeney (1996); Kothari, Leone, and Wasley (2005) and Barton and Simko (2002). The results from 802 companies selected from member countries of APTA indicated that, in all countries except Bangladesh, the earning management is not performed for improving earning informativeness in market and rather it is done for achieving manager's personal benefit. The specific behaviour is seen in India and Sri Lanka in which the higher accrual quality reduces the pricing of earning in market. This behaviour is due to the fact that investors are uninformed. Moreover, this behaviour is due to information asymmetry. The earning quality also has negative influence on earning informativeness towards market value in case of India and Bangladesh, which suggest that overstatement of beginning net operating assets have negative effect on earning information content as this overstatement reduces returns on asset due to overstated denominator, rather it restricts managers from biased earnings. However, in other countries it works in a way suggested by Barton and Simko (2002). The market value measure of India has greater dependency on interaction term as compared to China and Pakistan due to lower price synchronicity. China also has greater influence of interaction term on its company's market values than Pakistan.

Determinants of capital structure: evidence from Malaysian firms

PurposeThe purpose of this paper is to examine the determinants of capital structure using a dataset of firms in Malaysia.Design/methodology/approachThis paper carries out a panel data analysis of 8,270 observations from 827 listed non-financial firms on the Malaysia stock market over the period 2008–2017. To estimate the model and analyse the data collected from the DataStream and World Bank databases, the authors use static panel estimation techniques as well as two-step difference and system dynamic GMM estimator.FindingsThe results show that profitability, growth opportunity, tax-shield, liquidity and cash flow volatility have a negative and significant impact on debt measures. However, the effects of collateral, non-debt tax and earnings volatility on measures of debt are positive and significant. In addition, firm size, firm age, inflation rate and interest rate are important determinants of the present value of debt. The results also show a significant inverse U-shaped relationship between the firm's age and its capital structure. In general, the results support the proposition advocated by the pecking order and trade-off theories.Practical implicationsThe results of this study necessitate formulation of various policy measures that can counter the effects of debt on firms.Originality/valueThe present study is among the earliest to use both the book and market value measures of capital structure. It also uses three proxies for each: total debt, long-term debt and short-term debt. It incorporates earning volatility and cash flow volatility as new independent variables in the model. These variables have not previously been used together with both book and market value measures of capital structure. The study also examines the non-monotonic relationship between firm's age and capital structure using a quadratic regression method. It applies both static panel techniques and dynamic GMM estimation techniques to analyse the data.

Dividend Policy and Value of Quoted Firms in Nigeria: A Test of Miller and Modigliani Irrelevant Hypothesis

This study tested Miller and Modigliani dividend policy irrelevant hypothesis in Nigeria. The objective was to examine the validity of the irrelevant hypothesis. Tobins Q measure of market value was modeled as the function of dividend payout ratio, retention ratio, dividend per share and dividend yield. 20 firms were selected on the basis of availability of information necessary for conducting the study and the readiness of annual financial reports for the period of 10 years from 2008-2017. Cross sectional data was sourced from financial statement and annual reports of the firms. Based on the analysis of fixed and random effect results, random effect was used. The study revealed that 75 percent variation on the market value can be predicted by variation on independent variables in the regression model. The beta coefficient of the variables found that all the independent variables have positive and significant relationship with market value of the selected quoted firms. The study concludes that dividend policy is relevant as oppose to the irrelevant hypothesis of Miller and Modigliani. Its therefore recommend that managers should manage their dividend policies effectively since it is relevant and has significant effect on market value and optimal dividend policy which implies policy of trade-off between dividend payout and retain earnings should be well managed and investors should have adequate knowledge of dividend policy of quoted firms that will correspond with their investment objectives of avoid conflict in dividend policy.

Capital Structure and the Value of Quoted Firms in Nigeria: A Test of Miller and Modigliani Irrelevant Hypothesis

This study tested an insignificant hypothesis of the capital structure of Miller and Modiglian in Nigeria. The aim was to investigate the validity of the irrelevant hypothesis. The Tobins Q market value measure was modeled as a function of debt-to-equity ratio, long-term debt to equity ratio, and retained earnings ratio. Twenty companies were selected on the basis of the information needed to conduct the survey and the availability of annual financial reports for the ten-year period 2008-2017. Cross-sectional data were obtained from the annual accounts and annual reports of the companies. Random effects were used in the analysis of fixed and random effects. The study showed that 77% volatility in market value can be predicted by the variation of independent variables in the regression model. The beta coefficient of the variables found that the debt-to-equity ratio, the long-term debt-to-equity ratio, the capital-to-earnings ratio is positively and significantly related to the market value of the selected listed companies. The study concludes that capital structure is relevant, unlike Miller's and Modiglian's irrelevant hypothesis. Therefore, it is recommended that managers ensure an adequate combination of capital and debt.

Task Interdependence and Firm Performance in Outsourced Service Operations

We conceptualize task interdependence between firms in outsourced service operations as an endogenous design choice made by the outsourcing firm. Then, utilizing relative firm efficiency and Tobin’s q as performance metrics, we examine the impacts of the task interdependence choices of outsourcing firms on their performances. We examine data, collected from a variety of sources, on 184 service alliances across nine industries. We find that task interdependence in outsourced service operations increases with the knowledge dependence of outsourcing firms on their vendor firms and with other contract-related factors, such as alliance duration, transaction complexity, and repeat relationships. Results indicate that outsourcing firms face challenges in choosing the appropriate levels of task interdependence in their outsourced service operations, and that excessive levels of task interdependence in outsourced service operations negatively affect the performances of outsourcing firms, both in terms of relative firm efficiency and long-term market value measures. Based on these results, we infer that firms need to invest in modularity-enhancing service architectures that reduce task interdependences with vendors before outsourcing large-scale, knowledge-intense service operations. The study contributes to the understanding of factors that influence the performances of outsourcing firms, and provides guidelines for organizing outsourced service operations.

Price as a Measure of Market Value on the Real Estate Market

Abstract Issues related to the relationship between prices and values of goods have occupied the minds of economists since the beginnings of economic thought. These considerations concern both general issues and the direct, practical dimension of values. For the real estate market, the main value category considered and used is market value. Its concept has been defined at different levels of legislation, but regardless of how detailed the content of the definitions, they all refer to price as the main basis for reasoning. On the other hand, a part of the economic trends call into question the possibility of measuring values directly on the basis of prices. Consequently, in the light of existing divergences in interpretation, can prices be a good yardstick for value, particularly in the light of the evolving concepts of Highest and Best Use (HaBU) and Hope Value? In an attempt to answer the question, the paper presents considerations on the relationship between prices and value on the real estate market, in particular in the context of the significance of this relationship for the determination of market value. Theoretical studies were supported by empirical research, which allowed for disproving the research hypothesis concerning the relations between the analyzed economic values.

Board Rudiments and the Executive Attitude Towards Corporate Risk-Taking

This paper examines the effect of key board distinctiveness on managerial risk-taking behaviour. Using a total sample of 121 firms made up of 1,166 corporate directors and 847 firm-year observations, the study finds robust evidence across the three stages of estimation that suggests power separation in terms of CEO non-duality is negatively associated with executive risk-taking due to enhanced board assertiveness and independence. Board size is inversely associated with the variability of market value measure both within and at inter-firm levels. With average board membership in the study sample made up of 10 directors, the study finds crucial empirical evidence that points to the key benefits of large board configuration including the social capital, diversity of thoughts, knowledge, and experience, effectiveness and vigilance which curtails executive entrenchment. In contrast, the paper records positive association between the presence of foreign directors and corporate risk-taking. Due to their wealth of experiences, foreign directors tend to have more strategic sense of purpose and are likely not to hesitate in taking appropriate risk decisions when it really matters. While the paper finds little evidence that suggests a within-firm positive relationship between board independence and managerial risky propensities, there was no evidence found to indicate that board quality and ethnic diversity affects corporate risk-taking.

Preemptive Tools to Mitigate Financial System Risk: Lessons from the Recent Global Financial Crisis

Deposit insurance can protect financially unsophisticated savers and prevent depositor runs, but it creates a need for regulation to control excessive risk-taking by insured banks. Several regulatory flaws were exposed by the 2008-2009 financial crisis. They include: risk-based capital standards that led banks to retain securitization risks; tax policy that dissuaded banks from issuing sufficient equity capital; and the failure of non-equity capital, such as subordinated debt, to absorb the losses of large banks. This paper discusses actual and proposed regulatory reforms in three areas: restrictions on bank assets and activities; required capital; and deposit insurance. While some reforms have been productive, others have been ineffective. Regulatory reforms often focus on large banks’ accounting (book) value regulatory capital ratios whereas investor confidence is based on large banks’ market value capital ratios. Financial stability would be enhanced by more simple regulation that is based on forward-looking market value measures rather than backward-looking accounting value measures.

Audit Quality of Chinese ADR Engagements

SYNOPSIS The controversy over Chinese reverse mergers has led to concerns about the audit quality of all U.S.-listed Chinese companies. Because a sizeable number of foreign firms cross-list their shares as American Depositary Receipts (ADRs) issued by U.S. depositary banks (as opposed to direct listings), we study how auditors have managed their audits of Chinese ADRs. Our motivation for examining Chinese ADRs is based on the findings that cross-listing via the ADR process is beneficial for U.S. shareholders. We find that relative to ADRs from countries other than China, and relative to directly listed Chinese companies, Chinese ADRs are more likely to be associated with a Big 4 auditor and are less likely to restate prior-period financial statements. We also find that Chinese ADRs pay significantly higher fees than other emerging market ADRs and Chinese direct-listings. Collectively, these results suggest high audit quality for Chinese ADRs, which is in sharp contrast to the Chinese direct-listing results. Using Tobin's Q as a measure of market value, we find that the stock market rewards Chinese ADRs, indicating that investors incorporate the benefits of higher audit quality when evaluating Chinese ADRs.

Do Directors Have a Use-By Date? Examining the Impact of Board Tenure on Firm Performance

Corporate boards serve the important functions of monitoring and advising management. We examine whether corporate boards consisting of longer-serving directors are better able to fulfill these functions due to the firm-specific knowledge accumulation, or whether director performance suffers due to the deterioration of their technical knowledge and/or due to the decreasing independence of the board from managers. Using a sample of up to 3,000 firms over an 18-year period, our evidence suggests that board tenure is positively related to forward-looking measures of market value, with the relationship reversing after about 9 years on average. The detrimental effect of longer board tenure on market value (after an initial period of positive effects) is stronger for high growth firms, which is consistent with the deterioration of the board members’ ability to advise on the technical matters of firms’ operations.

The impact of Intellectual Capitals of Pharmaceutical Companies Listed in Tehran Stock Exchange on their Market Performance

Abstract The present study examines the effect of intellectual capital on the performance of pharmaceutical companies listed in Tehran Stock Exchange. To assess intellectual capital, the Pulic value added intellectual capital (VAIC), and to evaluate the performance of market value, market value measure to book value of the of assets (M / B) and Q tobin ratio are used. This research, in an analytic and separately, studies the effects of each of VAIC components on market performance value of 26 companies active in the pharmaceutical industry and listed in the Tehran Stock Exchange during 2008 to 2012 using multivariate regression based on panel. The results show that VAIC coefficient has a significant impact on market performance variables of pharmaceutical companies accepted in Tehran Stock Exchange, and among its components employed or physical capital has the greatest impact on market performance variables.

Stock Excess Return, R&D intensity and Market Concentration: A Study of IT Firms in India

Abstract This paper empirically investigates the role of R&D intensity on market concentration of firms using four key market valuation variables, namely (1) market share, (2) labor intensity, (3) firm age and, (4) firm’s market value. The empirical tests use database at firm level for the Indian IT sector from 1999 to 2013 from the CMIE Prowess database. The results of the regression analyses partially support our hypothesis that R&D intensity positively influences firm’s market value measure by the H-index. The test results are consistent with the hypotheses that R&D spending is more valuable for firms with larger market shares, higher labor intensity, and firms that are diversified. Keywords Investor valuation, R&D, IT industry, India I. Introduction Economists assert that innovation is one of the driving forces for employment creation and economic development. Schumpeter (1912) claims that firms’ can increase business profits dramatically by creative destruction following various innovative activities such as procurement of new materials, production of new products, findings of new markets, and adoption of new organizing methods. Furthermore, he insists these innovative activities become not only the driving forces for economic development, but also important factors for business fluctuations. Baumol (2001) finds that innovation has a positive effect on employment creation and economic development. The future growth opportunities and profitability of the innovative firms are higher than the non-innovative ones, and their excessive stock return is higher than the non-innovative ones too.

Does Information Technology Spend Impact On Company Performance? Evidence From Accounting And Market-Based Measures

This study investigates the association between information technology spend and future company performance for a sample of companies where accounting and market value measures are used as proxies for performance. While the earnings measure indicated a strong positive relationship initiating early on, the profit margin and asset turnover measures provided some unexpected and mixed findings. However, Tobins q, a market valuation measure, indicated a strong positive relationship that supported the notion that investment in information technology can improve future company performance.