Title: Tobin's q and firm performance: MCDM and clustering-based approach for Indian companies

Authors: Roma Kumari; Tamal Datta Chaudhuri; Indranil Ghosh

Addresses: Calcutta Business School, 24 Parganas South, Kolkata, West Bengal 743503, India ' Centre for Knowledge Ideas and Development Studies (KnIDS), 1/433 Gariahat Road (South), Jodhpur Park, Kolkata-700068, West Bengal, India ' IT & Analytics Area, Institute of Management Technology (IMT) Hyderabad, Shamshabad, RR District, Hyderabad-501218, Telangana, India

Abstract: Tobin's q has been interpreted as a forward looking indicator of firm performance. In this paper, we use it as a lead indicator in period t to find out its effect on firm performance in period t + 2. The conceptual framework used in the paper has Tobin's q as the indicator of expected firm performance which is manifested through asset turnover ratio, gross profit margin, enterprise value/EBITDA, incremental output capital ratio, returns on retained earnings and free cash flow. Further, we do a size class analysis for the relationships. For a sample set of Indian companies, we seek answers to whether did Tobin's q could predict business efficiency, business effectiveness, innovativeness and sustainability. After identifying the partial effects, to improve our understanding of the relationship between the realised variables and Tobin's q in one go, we apply a clustering driven multi criteria decision-making model on the realised variables.

Keywords: Tobin's q; efficiency; effectiveness; innovativeness; sustainability; multi criteria decision-making model; clustering.

DOI: 10.1504/IJBIS.2024.138048

International Journal of Business Information Systems, 2024 Vol.45 No.4, pp.564 - 590

Received: 18 Sep 2020
Accepted: 08 Mar 2021
Published online: 18 Apr 2024 *

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