Premium
The relationship between growth, profitability, and firm value
Author(s) -
Varaiya Nikhil,
Kerin Roger A.,
Weeks David
Publication year - 1987
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.4250080507
Subject(s) - profitability index , value (mathematics) , economics , shareholder value , econometrics , tobin's q , market value , enterprise value , equity (law) , market value added , equity value , shareholder , microeconomics , business , mathematics , monetary economics , statistics , finance , corporate governance , debt , debt levels and flows , external debt , political science , law
This research examined predictions drawn from value‐based planning models. Results indicate that profitability and growth do influence shareholder value in the manner predicted; however, the relationships are conditional. This study also shows that, the market‐to‐book value of equity ratio and Tobin's q‐ratio are theoretically and empirically, equivalent measures of value creation.