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The Misuse of Accounting-Based Approximations of Tobin’s q in a World of Market-Based Assets


  • Neil Thomas Bendle

    (Ivey Business School, Western University, London, Ontario N6G 0N1, Canada)

  • Moeen Naseer Butt

    (Suleman Dawood School of Business, Lahore University of Management Sciences, D.H.A, Lahore Cantt. 54792 Lahore, Pakistan)


Accounting-based approximations of Tobin’s q (AATQ) are increasingly popular in marketing. AATQ differ from Tobin’s original conception in that they use accounting data to assess the replacement cost of a firm’s assets; the core problem with this is that valuable assets go unrecorded in external reports, including systematic underrecording of market-based assets. This research examines the extensive erroneous claims made about AATQ in marketing studies. We note the widespread use of the metrics and demonstrate that the AATQ used in marketing (1) are not comparable across industries, (2) do not use only tangible assets in their denominator, and (3) should not find equilibrium at 1. AATQ are often described as performance metrics and can respond appropriately to certain types of positive performance. Unfortunately, they also respond positively to performance-neutral strategic choices. Furthermore, whenever AATQ exceed 1, as is typical, they increase even with completely wasted investments. We note that AATQ are especially problematic measures of performance for marketers because they are biased toward reporting that investments in market-based assets (e.g., brand equity and customer satisfaction) are effective. The misuse of AATQ we document suggests the need for marketing scholars to pay greater attention to the theoretical underpinnings of their metrics.

Suggested Citation

  • Neil Thomas Bendle & Moeen Naseer Butt, 2018. "The Misuse of Accounting-Based Approximations of Tobin’s q in a World of Market-Based Assets," Marketing Science, INFORMS, vol. 37(3), pages 484-504, May.
  • Handle: RePEc:inm:ormksc:v:37:y:2018:i:3:p:484-504
    DOI: 10.1287/mksc.2018.1093

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