Tobin's Q, Ratio of Tradable Shares and Firm Value

Tobin's q is widely used to measure the value of the firm, thus explaining various corporate phenomena. In China, however, the coexistence of tradable and non-tradable shares makes an accurate estimate of Tobin's q very difficult. When respectively using net assets per share, 0.18 times the price of tradable shares and 0.336 times the price of tradable shares as the price of non-tradable shares, the relationship of Tobin's q and ratio of tradable shares is statistically significantly positive. When using the price of tradable shares as the price of non-tradable shares, the relationship of Tobin's q and ratio of tradable shares is statistically significantly negative. This shows the method that China's scholars commonly used to measure Tobin's q may lead the wrong outcomes. This suggests in the regression analysis that the corporate value is the dependent variable, the ratio of tradable shares as an independent variable should be included in the regression equation.