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Firm Value, Risk, and Growth Opportunities

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  • Hyun-Han Shin
  • Rene M. Stulz

Abstract

We show that Tobin's q, as proxied by the ratio of the firm's market value to its book value, increases with the firm's systematic equity risk and falls with the firm's unsystematic equity risk. Further, an increase in the firm's total equity risk is associated with a fall in q. The negative relation between the change in total risk and the change in q is robust through time for the whole sample, but it does not hold for the largest firms.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7808.

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Date of creation: Jul 2000
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Handle: RePEc:nbr:nberwo:7808

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  8. Smith, Clifford W. & Stulz, René M., 1985. "The Determinants of Firms' Hedging Policies," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 20(04), pages 391-405, December.
  9. Kenneth A. Froot & David S. Scharfstein & Jeremy C. Stein, 1992. "Risk Management: Coordinating Corporate Investment and Financing Policies," NBER Working Papers 4084, National Bureau of Economic Research, Inc.
  10. Bekaert, Geert & Wu, Guojun, 2000. "Asymmetric Volatility and Risk in Equity Markets," Review of Financial Studies, Society for Financial Studies, vol. 13(1), pages 1-42.
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Cited by:
  1. Bebchuk, Lucian A. & Cohen, Alma, 2005. "The costs of entrenched boards," Journal of Financial Economics, Elsevier, vol. 78(2), pages 409-433, November.
  2. Gozzi, Juan Carlos & Levine, Ross & Schmukler, Sergio L., 2006. "Internationalization and the evolution of corporate valuation," Policy Research Working Paper Series 3933, The World Bank.
  3. Attiya Y. Javed & Robina Iqbal, 2007. "The Relationship between Corporate Governance Indicators and Firm Value : A Case Study of Karachi Stock Exchange," Governance Working Papers 22198, East Asian Bureau of Economic Research.
  4. Rosenberg, Matts, 2003. "Stock Option Compensation in Finland: An Analysis of Economic Determinants, Contracting Frequency, and Design," Working Papers 496, Hanken School of Economics.
  5. Nicolas Kohl & Wolfgang Schaefers, 2012. "Corporate Governance and Market Valuation of Publicly Traded Real Estate Companies: Evidence from Europe," The Journal of Real Estate Finance and Economics, Springer, vol. 44(3), pages 362-393, April.
  6. Hillegeist, Stephen A. & Peñalva, Fernando, 2004. "Stock option incentives and firm performance," IESE Research Papers D/535, IESE Business School.
  7. Hoje Jo & Maretno Harjoto, 2012. "The Causal Effect of Corporate Governance on Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 106(1), pages 53-72, March.
  8. Rountree, Brian & Weston, James P. & Allayannis, George, 2008. "Do investors value smooth performance?," Journal of Financial Economics, Elsevier, vol. 90(3), pages 237-251, December.
  9. Ralf Bebenroth & Donghao Li, 2006. "Performance Impact at the Board Level: Corporate Governance in Japan," Discussion Paper Series 179, Research Institute for Economics & Business Administration, Kobe University.
  10. Bronwyn Hall, 2006. "R&D, productivity and market value," IFS Working Papers W06/23, Institute for Fiscal Studies.

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