Firm Value, Risk, and Growth Opportunities

Hyun-Han Shin, Rene M. Stulz

NBER Working Paper No. 7808
Issued in July 2000
NBER Program(s):The Asset Pricing Program, The Corporate Finance Program

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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Document Object Identifier (DOI): 10.3386/w7808

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