Firm Value

Population of this research is property & real estate companies. Samples obtained based on predetermined criteria, then get 15 property & real estate companies in accordance with research needs. Furthermore, descriptive statistical analysis was carried out to provide an overview of each variable in the form of mean, standard deviation, maximum, minimum values based on the data studied. The dependent variable in the study is firm value (TOBIN’S Q), while the independent variable consists of profitability (ROE), capital structure (DER), and ownership structure (managerial ownership). The method used in this study is multiple linear regression. Multiple linear regression is a parametric regression. Parameters that are expected to be fulfilled are, residuals is in normal distribution, residuals do not occur autocorrelation, residuals do not occur heteroscedasticity and inter- independent variables do not occur in multicollinearity cases. Multiple linear regression models can be said to be fit models, if all parametric requirements are met and known as BLUE (Best Linear Unbias Estimation).

a. Dependent Variable: firm size (Enterprise value) (Cr.) The back ward linear regression is used to determine the factors that have significant impact on the firm value. The variables such as liquidity ratio, interest coverage ratio, and cash flow from operating activities, financial leverage ratios, cash flow coverage ratio and age of the company are significant determinants of firm value. The regression coefficients for liquidity ratio (-4937.48) represent that one- unit change in the liquidity ratio, the firm value has negatively influenced to -4937 times. This states the negative relationship between the liquidity and the firm value. As the firm maintains higher liquidity, in the form of cash and liquid instruments, the amount of cash that can be used for productive use is made as idle and the profitability decreases. The interest coverage ratio also shows the negative relationship with the firm value. One-unit change in the interest coverage states the negative influence of firm value. If the net income increases by one unit, then the firm

Over a period of five decades, empirical investigation of the relationship between leverage and firm value has always been of great interest for the scholars and practitioners around the world. In 1958 Modigliani and Miller found that the value of any firm does not depend on its capital structure in a perfect capital markets. In other words, the firm value is independent of its leverage. Sarma and Rao (1969) employed Merton H. Miller and Franco Modigliani’s model to a non-regulated industry and tested the MM hypothesis on the influence of debt on the value of a firm and found the results in support of their hypothesis that “after allowing for the tax advantage from the interest paid on debt, the value of a firm is independent of its capital structure”. However, we take both the leverages (operating and financial) to test our proposed hypotheses as only few studies have taken operating leverage as a determinant of firm value. Azmat (2014) investigate the relationship between firm value and cash holdings and find a concave relationship between firm value and cash holdings. The firms’ value and financial leverage are significantly and directly associated (Sharma, 2006). Garcia and Jorgensen (2010) reported that a trade-off (Dotan & Ravid, 1985; Trezevant, 1992) or a U-shaped relation (Huffman, 1983; Prezas, 1987; Kale, Noe, & Ramirez, 1991) between operating and financial leverage exists due to the interactions between investment and financing decisions. The leverage causes a change in the volatility of stock returns (Christie, 1982; French, Schwert & Stambaugh, 1987; Schwert, 1989; Cheung & Ng, 1992 and Nishat, 2000).

As shown in Table 3, the coefficients of the variables for the capital structure dimension (AdLev, AdIn_lia, AdSht_lia) all have a negative sign, which indicates that the deviation from the optimal capital structure will lead to a discount of the firm value. The paper pays attention to the sign of the multiplicative interaction term by the managerial power variables and the capital structure variables. When the deviation of leverage ratio (AdLev) is used to measure the capital structure deviation, the coefficients of the two multiplicative interaction terms (AdLev * Leader, AdLev * Chairshare) are −0.022 and −0.429 with the significant level at 10% and 1% respec- tively; when the deviation of ratio of liabilities with interests (AdIn_lia) is used, the coefficients are −0.004 and −0.451 with the significant level at 10% and 5% respectively; when the deviation of short-term liability ratio (AdSht_lia) is used, the coefficients are −0.015 and −0.374 with the significant level at 10% and 10% respec- tively. The regression results indicate that ceteris paribus, the stronger the managerial power is, the stronger the discount effect of the deviation of the capital structure is.

diminishing the value of firms and that firms that have hedging value above 300,000 Euros is increasing the value of firms. Furthermore, there is significantly positive relation between Tobin’s Q and profitability, which is consistent with the theory of Breeden and Viswanathan (1998): more profitable firms as proxied by high ROA have higher Qs. I also find that there is statistically significantly positive relationship between dividend and Tobin’s Q, which is consistent with the theory of Jin and Jorion (2006). This finding is consistent with the prediction of Jin and Jorion (2006) that dividends may be viewed as a positive signal from management. If the companies paid the dividend, it may indicate that company is profitable and management in good quality. The investors reward companies with higher valuation. Size has an insignificantly negative effect on firm value. The fact that Size is negatively correlated with Tobin’s Q means that according to Lang and Stulz (1994) and Bodnar et al (1999), multinational firms are likely to be larger companies. Multinational and bigger firms, due to their operations in different locations, are arguably more inefficient than smaller organization. When companies do business in more than one country, efficiency and effectiveness are likely to become low because of lack of corporate governance. While shareholders seek value maximization as a goal of corporate decisions, managers’ objectives may differ. In particular, managers seek to act in their own self-interest, which at times may be at the expense of shareholders’ interests. Extensive geographic diversification may result in a negative impact on firm value. The bigger the companies are, the more multinational they are, the more negative impact on firm value there is. Moreover, there is insignificantly positive relation between Tobin’s Q and both geographical diversification (GD), which is consistent with the theory of Bodnar et al (2006) that a geographically diversified firm can be more valuable because of its ability to arbitrage institutional restrictions such as tax codes and financial restrictions.

For tangibility and growth in total assets, the results are inconclusive for its effects on firm value. With respect to Equation (3), relative measure of firm val- ue PB, tangibility is significant at 5% significance level with growth in total assets significant at 1% significance level. With respect to absolute firm value measures, tangibility is significant at 1% significance level for Mcap but is insignificant for EV. On the contrary, growth in total assets is significant at 5% significance level for EV but is insignificant for Mcap. Prior studies including works of Rajan and Zingales [16], Feidakis & Rovolis [27], Antoniou [25] and Dang [41], have shown a positive significant relationship between firm leverage and tangibility on account of trade off view and agency costs. It is yet to be explored further whether the ownership of hotel land and building resides with the firm or are leased. In such cases a more detailed study of the nature of ownership is re- quired. Currently, it is beyond the scope of this study to examine it in depth. Tangibility and growth in fixed assets will also determine the level of secured debt the firms are targeting based on collateralized assets. It also needs to be ex- plored with respect of how secured debt impact firm value. In our study, debt has been taken as total outside liabilities only and not demarcated between se- cured or unsecured.

There are several other ways in which a company may become politically connected, e.g. through indirect ways such as lobbyists and consultants, or through other direct ways such as donations. As mentioned in the introduction, existing studies provide at best mixed evidence on whether donations help companies in becoming politically connected. Furthermore, even if they do, Jayachandran (2006) raises the question whether donations have a causal effect on firm value or simply represent industry preferences. Consistent with the latter, Goldman, Rocholl, and So (2007) show that donations lose their explanatory power once the industry effect is taken into account. For a robustness test, we collect donation data, for the 1994 and 2000 elections, from the Center for Responsive Politics (CRP), a non- partisan research organization that collects information on corporate donations to the Republican and Democratic Party. We then construct a dummy variable that takes a value of one if a party assigns more than 50% of its donations to the Republican Party and a value of zero otherwise. This variable is included in the estimation along with the board connection variable. The results, which can be seen in model 11 of tables 15 and 16 show that the donation variables are not significant, while the board connections variables remains significant. As a further robustness test we create a continuous donation variable which records for each company the percentage amount donated to Republicans out of the total political donations made by that company. The results, available upon request, remain the same.

The results of this study show that there is a positive relationship between institutional ownership and firm value. When the institutions are classified into domestic and foreign ones, however, it is found that firm value increases with higher ownership by domestic institutions, but deteriorates with higher ownership by foreign institutions. These findings have important implications regarding the link between institutional ownership and corporate governance in Thai firms. On the one hand, domestic institutional investors appear to be effective in providing monitoring activities, thus mitigating the agency costs of free cash flow that tend to rise when there are large amount of excess cash under the control of managers (For example, rather than disgorging excess cash to shareholders by paying dividends, managers may undertake negative Net Present Value projects to build their empires). On the other hand, foreign institutional investors may be inactive and even conspire with managers to consume corporate resources at the expense of minority shareholders.

Diversification and firm value remained relevant to most researchers for the past decades. This is because diversified company considers as a significant player in an emerging market (Kim, Hoskisson, Tihanya and Hong, 2004). Most of the study determines what factors can affect the firm value. It was stated that firm’s wealth, technology, organization structure, human resources with discounted future cash flows (Kayali, Yereli and Ada, 2007) and environmental factors of industrial establishments (Konar, Bailly and Cohen, 2001) can affect firm value. Another study uses customer satisfaction, management understanding, technology usage, and product quality as factors that influence firm value (Düzer, 2008; and Akgüç, 1998). There are also many studies that have identified firms’ competitiveness as a factor that can affect firm value (Amiri Aghdaie et al., 2012; Ansari and Riasi, 2016; Riasi, 2015a; Riasi and Pourmiri, 2015). Additionally, there are various studies that focused on sustainable growth (Riasi and Amiri Aghdaie, 2013; Riasi and Pourmiri, 2016) and firm’s financing in order to determine the factors that affect firm value (Riasi, 2015b). However, most of the study used all types of firms to determine the factors of firm value. This study will focus on the firm value of diversified firms.

By applying the measurement of Structural Equation Model (SEM) on 150 firms listed in Bursa Efek Indonesia (BEI) during 2006-2010, this paper gives some empirical findings. The first, profitability variable, growth opportunity and capital structure are influenced positively and significantly toward firm value. It means that the bigger the profitability, the higher the growth opportunity and the bigger the liabilities proportion in the structure of firm funding, the bigger the firm value. The second, capital structure variable is an intervening variable for growth opportunity and not intervening for profitability. The last condition occurs because profitability has a contrast influenced with capital structure. It means that capital structure will increase the positive effect of firm profitability toward the firm value.

On the other hand, Kim and Schloetzer (2013) report that engagement is a complex and risky process, that is costly and time-consuming for management; is likely to send uncoordinated and inconsistent messages and signals from several distinct engagements; is unlikely to accommodate the variety of shareholder interests and expectations causing disappointments; and may face legal challenges of unfair provision of market-sensitive information to selected engagers at the expense of other market players. Goranova and Ryan (2014) also argue that shareholder engagement may just compound managerial self-interest with shareholder self-interest. As observed by Bratton and Wachter (2010), the U.S. mortgage crisis may have been fanned by shareholders who encouraged management towards managing-to-market strategies, rewarding them with generous compensation for their high-risk, high-return strategies that gave shareholders short-term wealth. Bebchuk et al. (2015) however suggest, based on their recent work, that claims of negative effects of hedge funds activism on long-term firm value are not only not supported by empirical data, but that activism actually contributes to improved performance.

The paper shows that politically motivated interventions in the financial market in the form of bailing out borrowing firms reduce banks’ incentives to gather valuable information about firms’ projects. This loss of information is a hidden cost which adversely affects firm value. Firms invest resources and pay a premium to politically connected persons (BOD or other personnel). Such connections serve the twin pur- poses of hedging and enhancement of the value of collateral pledged against bank loans. Feeling secured, banks lose incentives to monitor borrowing firms. Thus, wealth effect of bailout from political connection is partially offset by the losses of valuable information brought about by bank lending. In equilibrium, the trade-off from gains out of political connections and costs due to losses from information- based bank monitoring depend on (i) the country’s disclosure laws, (ii) the political environment, (iii) the premium paid to form connections, and (iv) the state of the economy.

The paper shows that politically motivated interventions in the financial market in the form of bailing out borrowing firms reduce banks’ incentives to gather valuable information about firms’ projects. This loss of information is a hidden cost which adversely affects firm value. Firms invest resources and pay a premium to politically connected persons (BOD or other personnel). Such connections serve the twin purposes of hedging and enhancement of the value of collateral pledged against bank loans. Feeling secured, banks lose incentives to monitor borrowing firms. Thus, wealth effect of bailout from political connection is partially offset by the losses of valuable information brought about by bank lending. In equilibrium, the trade-off from gains out of political connections and costs due to losses from information-based bank monitoring depend on (i) the country’s disclosure laws, (ii) the political environment, (iii) the premium paid to form connections, and (iv) the state of the economy.

Based on the results of the sixth hypothesis testing in this study, it could be seen that p- value (0.10) was higher than the specified significance level (≤ 0.05), and the value of the path coefficient was positive (0.11). It indicated that carbon emission disclosure did not moderate the effect of liquidity on firm value. These results suggest that investors will see more the firm's ability to finance the firm's operations and investments than social and environmental disclosures in the form of carbon emission disclosure. It is because investors only see in terms of financial performance that can contribute to the firm value, so the disclosure of social information in the annual report does not affect investors in investing.

evidence linking GPs to firm value destruction using more recent data. Rather than merely updating prior work, this Article enhances the literature by including new data on another common term in CEO employment agreements—regular severance promised to CEOs upon termination, regardless of a change in control. Prior to 2006 the SEC disclosure requirements did not require regular reporting of severance arrangements with many firms simply not providing the information in public documents. Hence, prior studies were unable to effectively control for regular severance. Comparing the percent of CEOs at S&P 1500 firms reporting regular severance packages just after the new disclosure requirements with the percent who made voluntary disclosures of such arrangements prior to 2006 illustrates the extent of the under reporting problem. For example, the Investor Responsibility Research Center (IRRC) data used in those earlier studies indicate that only 6.0% of CEOs at S&P 1500 firms had regular severance arrangements in 2004. In contrast, in 2006 with the new disclosure requirements the ExecuComp data indicates that 50.2% of the CEOs at S&P 1500 firms had regular severance arrangements. 11 The under-reporting of severance

Previous research on the effect of equity-based compensation (EBC) on firm value reached different conclusions. Results of previous scholarly work ranged from a positive relation to no significant relation -with the firm value being proxied by Tobin’s Q. This paper, thus, investigates whether equity-based compensation will help to align management and shareholders’ objectives. Our empirical results suggest that equity-based compensation does have a direct and indirect positive effect on firm value. Research findings also show that the marginal negative effect of managerial entrenchment on firm value will be reduced for firms that are characterized with high EBC. Furthermore, an increase in the percentage of independent directors increases the positive marginal effect of EBC on shareholders wealth.

An analysis of employee-wage data of Korean firms covering 20 years reveals that both the Age-Wage structure and the performance-based compensation system have positive relationships with firm value. The ways in which these two types of incentive systems improve firm value, however, are not uniform. While the Age-Wage structure contributes to firm value through the enhancement of return on assets (ROA), cost reduction, and an improvement in labor productivity, the performance-based compensation system does so through sales growth. These results imply that Korean firms use the performance-based compensation system mainly to increase the size of firms rather than to improve operational efficiency. This study differs from previous studies in the following way. This study measures the effectiveness of compensation systems using continuous variables. With the improved measurement method, this study successfully captures the effects of compensation systems on the major factors of firm value, while other studies fail to measure such effects. By showing the paths of the firm value enhancement process induced by two compensation systems, this study can contribute to the microscopic design of optimal monitoring systems.

irm value is determined by numerous complex factors. Since Ball & Brown (1968), numerous researchers have conducted studies on the capital market. Most of these studies focus on comparing the value relevance of accounting figures with share prices. The evaluation of firm value becomes an issue when deciding which information has value relevance. Ohlson (1995) investigated firm value using the information of book value of net assets and net earnings from the numerous accounting figures of a firm. However, subsequent researchers have argued that considering other information that reflects a firm’s characteristics could not only explain the firm value better, but also intensify the usefulness of Ohlson (1995)’s model (Kwon et al. 2010; Kim, 2005).

of firm valuation) and/or which accounting or market-based measures are used. The German sample however does provide more evidence in favor of a positive relationship between related diversification and firm value than the Dutch sample, which holds for all the three accounting-based measures (total assets, total sales and EBIT). A remarkable and important result indicating this more positive relationship is found for median-based excess values based on firm value in case of total sales multiplier aggregation: During recent financial crisis-year 2008-2009 values of respectively 0.101 and 0.073 are respectively found for unrelated diversified and related diversified firms. This result is supporting the argument that in a credit-constrained environment [i.e. during the recent financial crisis (2007-2009)] it can be (more) valuable to have related segments within conglomerates with respect to internal capital allocations, but contradictory results are also found for as well Germany as The Netherlands: During the crisis, unrelated diversified conglomerates possess higher excess values than their related counterparts. The most consistent and similar results for both Germany and The Netherlands are found for the market value of equity/total sales based measure: Related diversified firms trade approximately at a 0.5% higher value than their unrelated counterparts. Empirical evidence supporting the fact that the amount of related segments have a positive relationship on excess values are provided by the performed regressions. For the German sample additional evidence was found (with the exception of excess values based on EBIT multiplier aggregation), supporting ting the fact that related diversification has a positive effect on excess values. This additional evidence was however not found for the Dutch sample. Even though, some results from the Dutch sample suggest that there also exists a positive relationship between excess values and related segments, but these results were not proved to be statistically significant and therefore no conclusions can be drawn.

Incorporating some sort of a market failure in the model could indeed open the door to a result where the government's tax-subsidy program speeds-up investment, its expected cost to the government is zero and it does no harm to the firm's value. An example of such a market failure would be a positive externality to the investment that the firm could not cash in on but the government could. Another example is a credit market imperfection that makes the interest rate to the government lower than that relevant to the firm. However, the result that the existence of such failures may lead to a situation where such a tax-subsidy program may be beneficial to all the involved parties is already well known and has nothing to do with the interactions among uncertainty, irreversibility and the option to delay the timing of investment.