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Tobin's q and firm performance: : MCDM and clustering-based approach for Indian companies

Published: 18 April 2024 Publication History

Abstract

Tobin's q has been interpreted as a forward looking indicator of firm performance. In this paper, we use it as a lead indicator in period t to find out its effect on firm performance in period t + 2. The conceptual framework used in the paper has Tobin's q as the indicator of expected firm performance which is manifested through asset turnover ratio, gross profit margin, enterprise value/EBITDA, incremental output capital ratio, returns on retained earnings and free cash flow. Further, we do a size class analysis for the relationships. For a sample set of Indian companies, we seek answers to whether did Tobin's q could predict business efficiency, business effectiveness, innovativeness and sustainability. After identifying the partial effects, to improve our understanding of the relationship between the realised variables and Tobin's q in one go, we apply a clustering driven multi criteria decision-making model on the realised variables.

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Published In

cover image International Journal of Business Information Systems
International Journal of Business Information Systems  Volume 45, Issue 4
2024
170 pages
ISSN:1746-0972
EISSN:1746-0980
DOI:10.1504/ijbis.2024.45.issue-4
Issue’s Table of Contents

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Inderscience Publishers

Geneva 15, Switzerland

Publication History

Published: 18 April 2024

Author Tags

  1. Tobin's q
  2. efficiency
  3. effectiveness
  4. innovativeness
  5. sustainability
  6. multi criteria decision-making model
  7. clustering

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