Effects of CEO Characteristics on the Firm Value of Listed Corporations

in the Philippine Stock Exchange

Kent Robert Lumanas • Ali Saddique M. Kapampangan •

Jufiel I. Aberilla • Charles D. Flores • Xaviery John M. Luna

ABSTRACT

This study was conducted to determine which characteristics of a Chief Executive Officer (CEO)
affects firm value. Specifically, this study used age, sex, tenure and field of specialization based
on education as independent variables and Tobin's Q as the dependent variable representing firm
value. Due to limitations such as having a presentational currency other than Philippines Peso
and lack of information about their CEOs, the entire population of the firms listed in the
Philippine Stock Exchange (PSE) has been narrowed down to one hundred fifty-seven firms
(157). Data regarding firms are gathered from PSE Edge Portal. A bootstrapped robust linear
regression was used to determine the relationships among variables holding firm size and
leverage constant. Results showed that among the independent variables mentioned, only sex has
a significant effect on Tobin's Q. This study showed that male CEOs of Philippine firms
outperform their female counterparts.

Keywords: CEO characteristics, Tobin’s Q, Philippine Stock Exchange, firm performance

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Effects of CEO Characteristics on the Firm Value of Listed Corporations

in the Philippine Stock Exchange

1. Introduction

As company operations grow, more shareholders become engaged in catering growth.

The number of shareholders has increased to a point where influencing business outcome was

difficult. In response to decreasing shareholder oversight, managers were appointed to take care

of the business, thus the creation of the Board of Directors (BOD) vested with corporate

governance and powers such as providing independent check and balance on the management, as

provided in The Corporation Code of the Philippines and the Revised Code of Corporate

Governance.

The separation of ownership from control results in potential conflicts due to the

divergence between management and shareholder interest. The top management is generally

responsible for suggesting and implementing major policy initiatives, while shareholders who are

the owners of the corporation assumes a substantial portion of risk associated with those

decisions. This agency problem between management and equity made the monitoring role of the

board of directors a crucial component of corporate governance (Prevost, Ramesh, & Hossain,

2002).

According to Letza, Sun, and Kirkbride (2004), the stakeholder perspective is a relevant

approach for analyzing the firm’s corporate governance. It is reasonable to believe that this point

of view is valid as they are the ones who hold the greatest interest in a company. Through this

perspective, it can be inferred that the effectiveness of the boards in monitoring the management

is of primary concern for the stakeholders.

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Though governance was instituted to include division of labor between the board and

management, Chief Executive Officer (CEO) influence was clear to affect board decision

making. According to Lockhart and Crow (2016), CEOs hold considerable amount of knowledge

about the company that even the “most well-intentioned” has a power advantage over non-

executive directors. A prior study by Cheng, Gao, Lawrence, and Smith (2014) suggests that the

corporate governance characteristics of a firm depends on the power of CEO in relation to the

power of the board. This gives the idea that the CEO position pose a significant impact on the

board’s effectiveness of corporate oversight and in achieving company targets and objectives.

CEO impacts on firm performance have long been studied widely but still have shown

inconsistent results. Serra, Tres, and Ferreira (2016) associates this inconsistency to the

complexity and differences in context. According to Olie, Van Iterson, and Simsek (2012) there

is a need to observe the context to understand the effect that leaders have on their respective

environments. This builds the argument that the actions of a CEO (Elbanna, 2012) and the

effects in company performance (Crossland & Hambrick, 2007) vary depending on the national

context in which it operates. The effects in each country is important to consider in order to

remedy the unsettled differences among prior studies, thus this paper was made to find out the

extent to which these differences are relevant in the Philippines.

2. Literature Review

Influence of chief executive officer in the board.

A research conducted by Linck, Netter, and Yang (2008) showed that in relation to board

leadership, the CEO and Chairman of the Board posts were combined, especially for large firms.

For most instances, a CEO assumes the board chairmanship when the CEO is older and has a
 4

longer tenure. The study of Westphal and Zajac (1995), reinforced by Krause, Withers, and

Semadeni (2017), further describes the impact of CEO on the board decision-making processes,

e.g., BOD selection, director compensation scheme, etc. The study revealed that the social

psychological mechanism, by which the CEO’s preference can influence, affect subsequent

decision making intentionally or unintentionally. That being the case, it can be inferred that the

CEO inherently holds a significant influence on the board of directors for large firms. This

assertion is supported by the study of Papadakis and Barwise (2002) suggesting that the CEO has

an influence on the strategic decision-making process, over and above the influence of external

environment, firm size, and decision characteristics, making CEOs natural research targets for

firm performance.

With the corporate goal of maximizing shareholder’s wealth, studies conducted relating

to the characteristics of the board of directors mostly focused on analyzing its relationship with

firm performance. For instance, a multi-country study conducted about board diversity showed

that firms with more female directors records a higher performance (Terjesen, Couto, &

Francisco, 2015). This reinforced the findings of Campbell and Vera (2008) that board diversity,

in the context of sex provides a competitive advantage as against companies without any female

directors in their board. Another study about the effects of BOD characteristics to firm

performance was regarding the supervisory quality. Lin, Yeh, and Yang (2014) concluded that

higher board attendances, as an indication of supervisory quality, enhances higher firm

accounting performance. These results, considering the impact of CEOs on the BOD, indicate

that CEO characteristics might also have an effect on firm performance.

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Human capital theory

The theory of human capital goes back to Adam Smith (1776) in his fourth definition of

capital where he noted: ““The acquisition of … talents during … education, study, or

apprenticeship, costs a real expense, which is capital in [a] person. Those talents [are] part of his

fortune [and] likewise that of society”. This concept has stayed dynamic over time as

developments were made by economists and management specialist. Bontis, Dragonetti,

Jacobsen, and Roos (1999) defines human capital as “the human factor in the organization; the

combined intelligence, skills and expertise that gives the organization its distinctive character.”

In a more recent definition by Thomas, Smith, and Diez (2013) defining human capital as “the

people, their performance and their potential in the organization”, it can be inferred that

employees can develop their skill and abilities over time, as to be noted with inclusion of the

term “potential” in his definition.

Human capital theory categorizes learned skills, and human capital more generally,

reflecting the degree of transferability of human capital between firms (Becker, 1964). Becker's

analysis dealt with comparing general and specific training for a job. The results showed that

general training increases the marginal productivity of workers by the same amount in the firm

providing the training as in other firms. Meanwhile, specific training was shown to have no

effect on the productivity of workers that would be useful in other firms.

Top managers have traditionally been viewed as making a positive contribution to the

firm in the field of strategic management. Aside from tangible assets, human capabilities can

accumulate and become capital stock, as argued by Schultz (1961) along with Becker (1962) and

Ben-Porath (1967). An individual’s knowledge, skills, and experience can turn into sustainable

capital. Ben-Porath’s model was one of the first that incorporated a law of motion for human
 6

capital. According to the model, sustainable growth can be achieved through storable human

capital and constant returns on human capital.

CEO and firm performance.

The CEO has become the face of the company and any event pertaining to the CEO will

create changes in the market. These changes were illustrated by a study of Clayton, Hartzell, and

Rosenberg (2005) showing the increase in stock price volatility after a turnover. The research

further argued that market expectations about firm value was revised more frequently than in the

past, as the market now evaluates the characteristics of the new CEO’s strategy and ability.

Both the board and CEO make high-level decisions. In some firms, the CEO makes all

the major decisions, making the CEO more powerful. However, a study conducted by Bebchuk,

Cremers, and Peyer (2011) associates this power with agency problems and to firm value

negatively. Lee, Park, J., and Park, S. (2015) argued that labelling CEO power as an agency

problem was premature and that the optimal level of power may vary for every firm or CEO

depending on every dimension. The study revealed that the optimal level of CEO power is

positively associated with firm value, while any excess of deficiency is negatively associated,

illustrating the inverse U-shaped relationship of CEO power and firm value.

As decision-making becomes more centralized in the hands of the CEO, firm

performance will be more variable (Adams, Almeida, & Ferreira, 2005). It is stressed that there

is a positive relationship between CEO power and stock return variability. These prompted

researchers to study CEOs and the impacts they might have on firm value.
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Firm value and Tobin’s q.

Firm value (FV), also called Enterprise Value (EV), is a metric that attempts to reflect the

market value of the firm, as an alternative to market capitalization. Sauaia and Castro (2002)

demonstrated how Tobin’s Q can be used as proxy for the value of the firm and a measure for

firm performance from the stakeholder’s point of view. Tobin’s Q, by definition, is the ratio

between the market value of the firm’s assets and the replacement value of its assets. It answers

the question of how much more a company is worth on the stock market compared to the costs it

will bear if it chooses to replace all assets (Diks, Rodriguez, & Driessen, 2016). If the ratio is

between 0 and 1, it means that the costs to replace all assets is higher than the market value,

implying that the stock is undervalued and vice versa if the ratio is greater than 1.

The variables to the equation is relatively subjective, as different analysts will have

different views on what market value and replacement value is. Although there are several

formulae available to compute Tobin’s Q, its purpose of reflecting firm value still holds the

same. In a study done by Bolinger, Brookman, and Thistle (2017), Tobin’s Q was decomposed

into return on assets (ROA), equity multiplier (EM), and price/earnings (P/E) ratio, all of which

explains the firm’s current status, e.g., current firm performance, leverage, and market valuation,

thus strongly supporting the idea of using Tobin’s Q as an indicator of firm value.

CEO characteristics.

While some argue that CEO characteristics are merely components of a knowledge base

for top executives and do not affect firm performance (Datta & Rajagopalan, 1998) others still

believe that, in one way or another, CEO characteristics will have an impact on firm performance

and firm value as a whole. For instance, in 2015, Vintila, Onofrei, and Gherghina showed that in
 8

the Bucharest Stock Exchange, CEO tenure and firm value have a positive relationship. In their

study, however, other variables, e.g., CEO duality, age, sex, residency, did not show a

statistically significant relationship. In another study, overconfident CEOs were believed to

overestimate their ability to generate return resulting to overpayment of target companies in

mergers and acquisition transaction, especially if they have access to internal financing

(Malmendier & Tate, 2008). This relationship was explained by Heaton in 2002 by showing that

optimistic managers tend to overvalue their own corporate projects as they believe that the

capital market undervalue their securities. The findings of their research greatly contributed to

the search for characteristics that will impact the firm value.

Company actions affecting a CEO’s motivation have also been studied throughout the

years. A research conducted by Matolcsy and Wright (2011) introduced two distinct types of

CEO compensation- those with equity-based incentives and those with not. Equity incentives

includes stock options or stock bonus. They concluded that firms having a compensation

structure inconsistent with its characteristics yields a lower performance compared to those with

strategically fit compensation mechanism. Further study by Yang, Dolar, and Mo (2014) found a

significantly positive relationship between CEO compensation and accounting-based firm

performance. The measure of compensation in this case includes cash-based compensation,

stock-based compensation, and total compensation. In a separate study, Li, Yang, and Yu (2015)

tells us that there is a positive impact of CEO stock-based compensation on performance. The

study further suggested that, based on robustness checks, the impact of stock-based

compensation on firm performance increases with firm profitability.

Despite the many attempts to examine the effects of executive characteristics on various

aspects of the firm, the existing literature has yet to show us what possible influences these
 9

characteristics could have on a varying context. Given the number of characteristics which might

affect firm performance and firm value, this paper, however, focuses only on field of

specialization, tenure, age, and sex.

Hypothesis 1: CEO’s field of specialization significantly affects the firm value of listed

corporations in the Philippines

Education, without a doubt, provide CEOs the capacity necessary to understand and adapt

to changing business environments, new technologies, and emerging trends. This flexibility to

change is what increases their capability as an executive to manage business outcomes, i.e., firm

performance. The field of specialization based on the education that the CEO has accomplished

may provide us with hints about his management style. For instance, an examination of Chinese

firms by Lin, Yeh, and Yang (2014) showed that CEOs with college education are more likely to

invest in R & D and to invest more than those without such attainment. The same results were

also achieved by Iqbal (2015) in his research regarding the use of financial derivatives in the

petroleum industry. It can be inferred from his study that a higher proportion of CEOs with

petroleum related degree, compared to those with business degree, took advantage of a hedging

program for risk management. The fact that CEOs with different fields of specialization take

different business choices gives us an idea that this might affect firm performance.

Hypothesis 2: CEO’s tenure significantly affects the firm value of listed corporations in the

Philippines

Adams, Almeida, and Ferreira (2005) revealed that CEOs with longer tenure maintains a

higher power within the firm. Although it results to a higher stock return volatility, more CEO

power leads to a better stock performance. In 2004, Huson, Malatesta, and Parrina argued that

hiring a new top executive may have a positive effect on firm performance in an expectation that
 10

such turnover will prompt performance improvements. The CEO tenure and performance-

turnover relation showed that CEO survival is associated with superior firm performance,

making favorable performance a motivation for longer tenure (Dikolli, Mayew, & Nanda, 2014).

The results of this study revealed that longer tenured CEOs outperform their replaced

counterparts within their first four years. Furthermore, Peni (2014) also suggested that there is a

positive relationship between the CEO’s tenure and the firm’s Tobin’s Q. Diks, Rodriguez, and

Driessen (2016) supports this claim by showing in their study that tenure is positively related to

firm value even if age works the other way around.

Hypothesis 3: CEO’s age significantly affects the firm value of listed corporations in the

Philippines

The study of Bertrand and Schoar (2003) suggested that older generation executives are

relatively more conservative in terms of decision-making, which may have a significant impact

on firm performance. In a separate study, Davidson III, Xie, Xu, and Ning (2007) examined the

impact of executive career horizon on the firm’s earnings management and found out that older

CEOs, those nearing retirement age, increase earnings management in the two years prior to their

retirement in the hopes for a greater pay in their final years, greater value for their options,

increased retirement income and more board seats in other companies. Reinforced by the notion

of Huang, Ryan Jr., and Wiggins III (2007), the study showed that tenured CEOs faced with

shorter horizons, take actions in pursuit for the protection of their wealth, hampering firm

performance.

Hypothesis 4: CEO’s sex significantly affects the firm value of listed corporations in the

Philippines
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Sex is the most widely researched characteristic in relation to firm value and firm

performance. Literature related to this topic has consistently shown how female CEOs contribute

better effects on firm performance. For example, Carter, D'Souza, Simkins, and Simpson (2010)

suggested that the inclusion of women and ethnic minorities on corporate boards has no negative

effect to firm performance. Campbell and Vera (2008) believes that female board membership is

significantly and positively related to Tobin’s Q. Diks et al. (2016) further supported this claim

when his study revealed that female CEOs improve firm value. Also, in Peni’s (2014) study,

the findings showed that, in terms of performance, firms with female CEOs are better than those

with male CEOs. The results of their studies support the movement of giving women the

opportunity to participate in the board of directors and upper management as they possess

external networks, information, and other characteristics which could benefit the firm.

3. Methodology

Data.

This study used two different sets of data: the CEO characteristics and the firm

characteristics. Data regarding CEO and firm characteristics were gathered from the companies’

2016 SEC filings accessed through the PSE EDGE Portal. The foregoing paragraphs will discuss

what specific data is gathered, accompanied by their descriptive statistics. Moreover, the

methodologies used in this study will be explained.

Data gathering and description.

The CEOs from companies registered in the Philippine Stock Exchange were used for

this study. The researchers gathered the parameters of different CEO characteristics and control
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variables from SEC Filings of Annual Report 17-1 with some being substantiated by Bloomberg

Ph. Firm characteristics were also gathered from companies’ filings to SEC, except for data

concerning market values which can be found in other features provided in the PSE EDGE

portal. The filings contain the financial statements data such as book value of assets and book

value of liabilities. For the purpose of this study, Tobin’s Q was calculated using the formula:

𝑚𝑎𝑟𝑘𝑒𝑡 𝑣𝑎𝑙𝑢𝑒 𝑒𝑞𝑢𝑖𝑡𝑦+𝑏𝑜𝑜𝑘 𝑣𝑎𝑙𝑢𝑒 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦

𝑇𝑜𝑏𝑖𝑛′ 𝑠 𝑄 = as suggested in a study by Diks et al. (2016).
𝑏𝑜𝑜𝑘 𝑣𝑎𝑙𝑢𝑒 𝑒𝑞𝑢𝑖𝑡𝑦+𝑏𝑜𝑜𝑘 𝑣𝑎𝑙𝑢𝑒 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦

Market value of equity used was based on the stock price of common shares as of the closing

date of 2016.

As of April 2018, the total number of companies registered in the PSE reached two

hundred seventy-nine (279). The population size was decreased to one hundred fifty-seven (157)

due to some CEO data that could not be obtained and data concerning companies with dollar-

denominated operations. Also, those companies with CEOs having a tenure of less than four

years were removed, since a new CEO outperforms its predecessor only after this said duration,

thus ensuring consistency of CEO effects (Dikolli et al., 2014).

Table 1

Descriptive statistics of CEO Characteristics

Variable N Mean Std. Deviation Minimum Maximum

Age 157 62.025 10.405 39 86

Tenure 157 13 7.563 4 50

Sex 157 1.929 0.256

Female 11

Male 146
 13

Field of Specialization 157 1.771 0.422

Non-business 36

Business 121

Table 1 gives an overview of the descriptive statistics of the independent variables that

correlates with CEO characteristics. The average age of CEOs is 62 years old, the oldest CEO is

86 while the youngest is 39. Average tenure is 13 years, with the maximum being 50 years and

the minimum being 4. The parameter of CEOs used for the listed companies in the Philippine

Stock Exchange has proven to be male-dominated with 146 in number compared to only 11

female CEOs.

The researchers examined the relationship between the independent, dependent and

control variables in order to determine whether there is an underlying influence on firm value in

an identifiable confidence level. A correlation matrix was used to investigate the dependence

between multiple variables at the same time.

In this study, sex and field of specialization will use dummy variables. The dummy

variables will be 1 for female and 2 for male, while for the field of specialization, non-business

will use 1 and business will use 2. The researchers consider the fact that firm value may also be

affected by other variables aside from CEO characteristics. Thus, control variables are

incorporated in the formula for a more thorough view on how Tobin’s Q is affected. The same

variables in the study of Diks et al. (2016) are used in the attempt to further explain the impacts

of CEO characteristics on firm value. His study, however, used five control variables compared

to this study’s two variables. The control variables that will be used in this research are:

• Firm Size – natural logarithm of the book value of assets;

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• Leverage – represented by debt-to-equity ratios.

Table 2

Descriptive statistics of dependent and control variables

Variable N Mean Std. Deviation Minimum Maximum

Tobin’s Q 157 1.748 2.077 0.001 13.653

Firm size 157 23.281 2.33 17.015 28.261

Leverage 157 0.472 0.437 2.08E-06 3.452

Table 2 describes the dependent variable Tobin’s Q with controlling variables, i.e., firm

size and leverage. As suggested by Cheung et al. (2014), firm size is computed as the natural

logarithm of total assets whereas leverage denotes the debt ratio computed as total interest-

bearing debt divided by total assets. Firm size has a low standard deviation compared to the

mean, this may suggest that companies involved have nearly the same size. However, with a

standard deviation greater than the mean, this suggest that the Tobin’s Q is skewed, which could

be due to different industry effects.

To resolve the problems on non-normality and heteroskedasticity, the researchers

performed a robust regression which resulted after 500 Bootstrap repetitions. Ordinary Least

Square [OLS] regression, which was used in the paper of Diks et al. (2016) was not possible due

to some violations in the assumptions such as presence of heteroskedasticity and non-normality

of data. The prob>chi2 is significant which means that the model is acceptable. This also means

that the model used does not suffer multicollinearity based on Variance Inflation Factor (VIF).
 15

4. Results and Discussions

Table 3

Correlation Matrix

Tobin’s Q Age Tenure Sex Field of Firm Leverage

Specialization size
Tobin’s Q 1

Age 0.01 1

Tenure 0.05 0.34*** 1

Sex 0.1 0.02 0.04 1

Field of -0.09 -0.1 -0.21*** 0.09 1

Specialization
Firm size -0.37*** -0.02 -0.15* 0.01 -0.11 1

Leverage 0.21*** -0.01 0.09 0.06 -0.06 0.17** 1

***Significant at 99% c.l.; **Significant at 95% c.l.; *Significant at 90% c.l.

Table 3 shows the correlation matrix between variables. As expected, the highest

correlation is that of age and tenure, implying that the longer the CEO is in his position the

older he gets. Tenure and field of specialization are negatively correlated which implies either

or both of the following: (1) that CEOs with non-business degree may have a longer tenure

and/or (2) CEOs with business degree may have shorter tenure. Furthermore, it can be implied

that the firms expand through issuance of debt as observed through the positive correlation

between firm size (as represented by the natural logarithm of the book value of the assets) and

the leverage (as represented by debt-to-equity ratios). Grimm and Smith (1991) and Chen, Hsu,

and Huang (2010), in their study, argued that as CEOs stay longer in their position, they tend to
 16

fall into a ‘competency trap’, becoming more conservative and risk averse. This can be

manifested by the negative correlation between tenure and firm size.

As noted earlier, the firm size and leverage has a positive relationship, thus concluding

that the smaller the firm size is, the lower will the leverage be. This also implies that the longer

the tenure of the CEO, the lesser risk it is willing to assume for the company. Hence, a CEO

might be reluctant to the idea of expansion and may even decline issuing debts and ultimately

reduce the debts outstanding.

Table 4

Bootstrapped robust regression results

Tobin’s Q Observed Coefficient P>|z|

Age 0.004 0.756

Tenure -0.011 0.658

Sex 0.71 0.013**

Field of Specialization 0.08 0.789

Firm size -0.376 0.000***

Leverage 1.305 0.002***

Constant 8.286 0.000***

Observations= 157

Prob > chi2 = 0.0001

Replications = 500

Note: ***Significant at 99% c.l.; **Significant at 95% c.l.

 17

Table 4 shows the results of the bootstrapped robust regression. The betas represent the

proportion that CEO characteristics influence firm value. Furthermore, the betas are tested for

reliability using z-test at different significant levels which are represented by the number of

asterisk; (*) means significant at 90% confidence level, (**) means significant at 95%

confidence level, and (***) means significant at 99% confidence level.

Results in table 4 showed that after controlling for firm-specific differences such as firm

size and leverage, only sex has a significant relationship to Tobin’s Q. The results further show

that male CEOs relative to female CEOs, have higher Tobin’s Q by 0.710 at 95% confidence

level. This opposes the study of Diks et al. (2016) and Peni (2012), which showed that

companies with female CEOs outperform companies with male CEOs and that of Vintila, et al.

(2015) which showed that the performance of the firms with male CEOs do not differ

significantly from that with a female CEO. However, the study mentioned above used companies

in the S&P 500 (United States) and Bucharest Stock Exchange (Bucharest, Romania)

respectively. Thus, the researchers argue that the effect of the sex of the CEO on the firm value

may differ per country. Also, the population used in the study was dominated by male CEOs,

which could have driven the result as it is. As for the Philippines, investors may put their trust on

companies led by male CEOs, thus driving stock prices upward.

The age of the CEO showed no significant effect on Tobin’s Q as also discussed in the

studies of Vintila et al. (2015) and Peni (2012). Similar to the study of Bhagat, Bolton and

Subramanian (2010), our results showed no significant relationship between field of

specialization and firm performance. The field of specialization may be a factor considered by

directors in hiring their CEOs, but it may not influence the views of the investors and the value

of the firm. As opposed to the studies of Vintila et al. (2015), Serra et al. (2016), Limbach,
 18

Schmid, and Scholz (2015), Peni (2012) and Diks et al. (2016), which showed either a positive

linear or a negative curvilinear (inverted U-shape) relationship between tenure and Tobin’s Q,

the results of this study showed that tenure does not significantly affect the Tobin’s Q of the

company.

It can be inferred from the study that investors might put higher values on companies

based on CEOs sex and ignore other CEO characteristics in making investment decisions. As

provided in The Corporation Code of the Philippines, there is still a significant amount of power

left for the BOD and shareholders, causing the firm value to be influenced by said parties.

Theories such as risk-averseness of CEOs, as they grow old from the experimentation period up

to the competency trap, may not apply effectively as it does in other countries because some, if

not most, significant decisions for the firm are still required to be approved by the BOD and the

shareholders.

5. Conclusion and Recommendation

Among the four CEO characteristics studied, only sex showed a significant effect on firm

value. This may mean that no matter what field of discipline a CEO took or how old a CEO is,

firm value would not be affected, and that the BOD, if it deems fit, may no longer consider

tenure in making decisions such as retaining a current CEO or hiring a new one. Also, the BOD

can afford to be less stringent in terms of the field of specialization and age when hiring

executives.

The researchers recommend further studies similar to this one and include other CEO

characteristics such as CEO experience in varying industries and CEO quality. The study focused

on Tobin’s Q as indicator of firm value, making it the sole dependent variable considered. Thus,
 19

the researchers suggest that future studies consider Tobin’s Q into components, namely ROA,

equity multiplier and P/E ratio, and use these components as dependent variables. Lastly, the

researchers also suggest considering CEO attitude as a potential independent variable knowing

that a CEO’s action greatly affects the firm.

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