Dependent variables


Predicted relationship & sign

Enterprise value (EV)

Enterprise value of the firm on Bombay stock exchange (BSE)

Market capital (Mcap)

Market capitalization of the firm on Bombay stock exchange (BSE)

Price to book ratio (PB)

Price to book ratio of the firms on Bombay stock exchange (BSE)

Independent variables

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


Annual inflation rate of wholesale price index

Significant & +ve