Panel Data Approach of the Firm’s Value Determinants: Evidence from the Jordanian Industrial Firms

Imad Ramadan

Modern Applied Science, 2016, vol. 10, issue 5, 163

Abstract: This study aimed to investigate the main determinants of the industrial firms' value in developing countries namely Jordan. To achieve this goal all 77 ASE listed industrial firms for the period from 2000 to 2014 were utilized resulting in 974 firm-year observations. Twelve firm specific variables, namely, firm's size; firm's age; firm's risk level; firm's sales revenue; firm's operating cost; firm's tax rate; firm's net margin; firm's capital expenditure; firm's book value; firm's earning per share; firm's dividend per share and firm's pay-out ratio, were tested as a possible determinates of the firm's value. After testing for Multicollinearity and Heteroscedasticity the result of the unbalanced panel data Multi-regression model approach shows that the joint effect of the twelve potential determinants interprets about 37% of the variation in the value of the Jordanian industrial firms listed at ASE (R-squares = 0.3682), therefore, firm's in developing countries like Jordan should concentrate on these specific variables of the firms in order to improve the value and thus the wealth of the shareholders. Another finding of the study is that the firm's risk level and tax rate are not statistically significant drivers of the Jordanian industrial firm's value. The findings of the effect of firm's risk level and tax rate on the firm's value were contrary with Tiwari Ranjit et al (2015) and Rappaport (1998) respectively.

Date: 2016
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