A Simple Approximation of Tobin's Q

Chung, Kee H.; Pruitt, Stephen W.

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A Simple Approximation of Tobin's Q

Financial Management, Vol. 23, No. 3, 1994

5 Pages Posted: 13 Jan 2007

See all articles by Kee H. Chung

Kee H. Chung

State University of New York at Buffalo - School of Management

Stephen W. Pruitt

University of Missouri at Kansas City - Department of Finance, Information Management, and Strategy

Abstract

This paper develops a simple formula for approximating Tobin's q. The formula requires only basic financial and accounting information. Results of a series of regressions comparing our approximate q values with those obtained via Lindenberg and Ross' (1981) more theoretically correct model indicate that at least 96.6% of the variability of Tobin's q is explained by approximate q.

Keywords: Tobin's q, Simple formula

JEL Classification: G1

Suggested Citation: Suggested Citation

Chung, Kee H. and Pruitt, Stephen W., A Simple Approximation of Tobin's Q. Financial Management, Vol. 23, No. 3, 1994, Available at SSRN: https://ssrn.com/abstract=957032