Is Tobin's Q a Good Indicator of a Company's Performance?

Abstract

The Tobin's Q was discussed as a new parameter for the TE - Total Enterprise simulations. The value of the Tobin's q for each simulated company was used as a proxy of company's performance and compared to the other seven past performance indicators in the game (The MMG). Just like in entrepreneurial reality, the hypothesis was proven that companies with a high performance exhibited at the end of ten rounds a higher value for the Tobin's q than those with a poor performance. In addition to portraying past events, as takes place with most performance indicators (sectorial multiples), the Tobin's q demonstrates aspects of the companies' future tendencies.