Tobin's q-Ratio and Market Reaction to Capital Investment Announcements.
There is a significant positive relation between Tobin's q-ratio and the magnitude of stock market reaction to capital investment announcements. The findings have the following implications for capital investment theory: (i) the results provide evidence substantiating the link between the q-ratio and real investment for industrial firms. For public utilities however, no such link exists. (ii) The study finds that average q and marginal q are correlated but the relation is somewhat more complicated than simple quality as assumed by numerous empirical studies. (iii) The findings suggest that investors can use average Tobin's q-ratio to identify companies with profitable real capital investment opportunities. Copyright 1997 by MIT Press.
Year of publication: |
1997
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Authors: | Blose, Laurence E ; Shieh, Joseph C P |
Published in: |
The Financial Review. - Eastern Finance Association - EFA. - Vol. 32.1997, 3, p. 449-76
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Publisher: |
Eastern Finance Association - EFA |
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