NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Firm Value, Risk, and Growth Opportunities

Hyun-Han Shin, Rene M. Stulz

NBER Working Paper No. 7808*
Issued in July 2000
NBER Program(s):   AP    CF

We show that Tobin's q, as proxied by the ratio of the firm's market value to its book value, increases with the firm's systematic equity risk and falls with the firm's unsystematic equity risk. Further, an increase in the firm's total equity risk is associated with a fall in q. The negative relation between the change in total risk and the change in q is robust through time for the whole sample, but it does not hold for the largest firms.

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