Dependent variables | Measurement | Predicted relationship & sign |
Enterprise value (EV) | Enterprise value of the firm on Bombay stock exchange (BSE) |
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Market capital (Mcap) | Market capitalization of the firm on Bombay stock exchange (BSE) |
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Price to book ratio (PB) | Price to book ratio of the firms on Bombay stock exchange (BSE) |
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Independent variables |
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Leverage (TOL_TNW) | Measures total outside liabilities of a company against the value of the company net of outside liabilities i.e. tangible net worth. Total outside liabilities include all borrowings and current liabilities | Significant & −ve |
Firm Quality (Z score) | Calculated using Altman z score by below formula: Z score = 1.2* (Working capital by total assets) + 1.4* (Retained earnings by total assets) + 3.3* (Earnings before interest and taxes over total assets) + 0.6* (Market capitalization over total liabilities) + 1* (Total income by total assets) | Significant & +ve |
Size (LnTA) | Logarithm of total assets of the firm which refers to the sum of all current and non-current assets | Significant & +ve |
Tangibility (FA_TA) | Ratio of net fixed assets over total assets. Net fixed assets defined as sum of net intangible assets, land & building, plant & machinery etc. after adjusting for arrears of depreciation and impairments | Significant & +ve |
Profitability (ROA) | Returns generated by an enterprise on the total funds deployed in business. Calculated as a ratio of profit after tax net of prior period and extra ordinary transactions over average of beginning and year-end total assets | Significant & +ve |
Growth (GrwTA) | Year on year change in average total assets | Significant & +ve |
Liquidity (CR) | Measures the ability to pay short term obligations; Short term liabilities include those payable within a year over short term assets | Significant & +ve |
GDP growth | Year on year growth of GDP at current prices | Significant & +ve |
Inflation | Annual inflation rate of wholesale price index | Significant & +ve |