International Journal of Business and Economics Volume 19, No. 2 September, 2020

Dynamics of Firm Value, Financial Performance, Leverage, and Governance: A Panel Data Analysis of Listed Indian Firms

Shalini Talwar

Associate Professor, K. J. Somaiya Institute of Management, Somaiya Vidyavihar University, Mumbai, India

Abstract

This research examined the effect of accounting-based performance measures, capital structure and corporate governance on firm value, measured by Tobin's Q, of listed Indian firms in fast-moving consumer goods (FMCG), automobiles (auto) and information technology (IT) sectors for a period from 2004 through 2017. The study used panel least squares dummy variables (LSDV) method to show that sales growth, return on equity, debt-equity ratio and corporate governance were statistically significant predictors of firm value for the sectors under the study. The fixed effects model was found to be more robust than pooled regression model by the Wald test, confirming that the dynamics between the dependent and the explanatory variables were different for each of the sectors. As the impact of variables on firm value was different for the manufacturing and services sectors, a key implication of the study is that managers should take into consideration the sectoral effect while estimating firm value.

Keywords：corporate governance, debt-equity ratio, dividend payout ratio, firm value, income growth, least squares dummy variables (LSDV) method, return on assets, sales growth.

JEL Classifications：C12, C33, G32.

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