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

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  • Khoo, Shi Shean

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.

Suggested Citation

  • Khoo, Shi Shean, 2019. "Tobin's Q of Honda Motor Company, Limited and its Determinants from 2013 to 2017," MPRA Paper 93879, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:93879
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    File URL: https://mpra.ub.uni-muenchen.de/93879/1/MPRA_paper_93879.pdf
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    References listed on IDEAS

    as
    1. Michael C. Jensen, 2010. "The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 43-58, January.
    2. Bai, Chong-En & Liu, Qiao & Lu, Joe & Song, Frank M. & Zhang, Junxi, 2004. "Corporate governance and market valuation in China," Journal of Comparative Economics, Elsevier, vol. 32(4), pages 599-616, December.
    3. Mehmet Ugur & Melsa Ararat, 2006. "Does Macroeconomic Performance Affect Corporate Governance? Evidence from Turkey," Corporate Governance: An International Review, Wiley Blackwell, vol. 14(4), pages 325-348, July.
    4. Bhagat, Sanjai & Bolton, Brian, 2008. "Corporate governance and firm performance," Journal of Corporate Finance, Elsevier, vol. 14(3), pages 257-273, June.
    5. Zuliu Hu & Li Li, 1998. "Responses of the Stock Market to Macroeconomic Announcements Across Economic States," IMF Working Papers 1998/079, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Tobin’s Q; market capitalization; Altman Z; corporate governance;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • G3 - Financial Economics - - Corporate Finance and Governance
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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