On the efficacy of Tobin's q for Pacific-Rim Countries

Abstract

Following Faught, Kale, and Rebello (1996), we investigate the efficacy of Tobin's q and other commonly used quality variables in forecasting the future performance of a firm in terms of profitability, and operating efficiency, and growth. We specifically examine the efficacy of these variables for two Pacific Rim countries, Japan and Singapore. We examine this efficacy of the predictor quality variables on both a continuous and dichotomous basis. We find that Tobin's q is a consistent predictor of profitability, while Q and cumulative abnormal returns are predictors of operating efficiency and growth.