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Article
A Modified Version of the Lewellen and Badrinath Measure of Tobin's Q
Faculty Publications
  • Darrell Lee, Kennesaw State University
  • James G Tompkins, IV, Kennesaw State University
Department
Economics, Finance, & Quantitative Analysis
Document Type
Article
Publication Date
4-1-1999
Abstract
Lewellen and Badrinath (1997) propose a superior method of measuring Tobin's Q. Unfortunately, their method is prone to a high percentage of missing observations and results in selecting samples of larger and more mature firms with lower Q statistics. A slight modification is proposed that preserves the appeal of their method, yet almost doubles the sample size, avoids sampling problems, and is statistically indistinguishable from their Q measure. In addition, a step in the Lewellen and Badrinath Q calculation is clarified, which was inadvertently omitted in their explanation, and, if left undone, can result in downward-biased measures of Q.
Citation Information
Darrell E. Lee, and James G Tompkins. "A Modified Version of the Lewellen and Badrinath Measure of Tobin's Q." Financial Management 28.1 (1999): 20-31. Print.