Estimating Tobin's Q for listed firms in Korea (1980-2005)

Comparing alternative approaches and an experiment with investment functions

Ji Youn Kim, Jooyoung Kwak, Keun Lee

Research output: Contribution to journalArticle

Abstract

Tobin's Q is the most common measurement of firm value and performance. However, estimating Tobin's Q accurately is not easy. Researchers have used book values of debts or assets rather than the market values. We estimate Tobin's Q for listed firms in Korea from 1980 to 2005 based on replacement costs of assets as well as market values of debts and common and preferred stocks. We compare the estimates using the modified annual average depreciation rates and economic depreciation rates. In sum, we present and compare four alternative series of Tobin's Q measures. We then estimate investment functions with alternative Tobin's Q values as regressors to compare the reliability of alternative estimates. We find that the simple measure of using book values of both debts and assets is the most unreliable.

Original languageEnglish
Pages (from-to)1-30
Number of pages30
JournalSeoul Journal of Economics
Volume28
Issue number1
Publication statusPublished - 2015 Jan 1

Fingerprint

Tobin's Q
Korea
Experiment
Debt
Depreciation
Market value
Assets
Book value
Firm value
Asset value
Preferred stock
Economics
Firm performance
Replacement cost

All Science Journal Classification (ASJC) codes

  • Economics, Econometrics and Finance(all)

Cite this

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Estimating Tobin's Q for listed firms in Korea (1980-2005) : Comparing alternative approaches and an experiment with investment functions. / Kim, Ji Youn; Kwak, Jooyoung; Lee, Keun.

In: Seoul Journal of Economics, Vol. 28, No. 1, 01.01.2015, p. 1-30.

Research output: Contribution to journalArticle

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