The relationship between growth, profitability, and firm value

Nikhil Varaiya, Roger A. Kerin and David Weeks

Strategic Management Journal, 1987, vol. 8, issue 5, 487-497

Abstract: This research examined predictions drawn from value‐based planning models. Results indicate that profitability and growth do influence shareholder value in the manner predicted; however, the relationships are conditional. This study also shows that, the market‐to‐book value of equity ratio and Tobin's q‐ratio are theoretically and empirically, equivalent measures of value creation.

Date: 1987
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