The role of internal control and firm specific characterstics on firm value

Abstract

Firm value is considered as a vital aspect in analysing a company s financial health. It is the total value of a company. This study determines the role of firm-specific characteristics such as firm size, firm age, newlineliquidity, firm complexity, board independence, institutional ownership, newlinenon-performing assets, annual volatility of stock returns, leverage and internal control represented by Enterprise Risk Management (ERM) and Big4 auditor on the firm value measured using Tobin s Q, Return On Equity (ROE) and Return On Assets (ROA). This proposition was addressed with the sound statistical investigation of 127 companies listed in the NSE financial services and manufacturing sectors by utilising annual newlinepanel data for 11 years from 2007-17. Regression results indicated that in the financial services sector, the purchasers consider firm size, firm age, liquidity, the volatility of stock returns and non-performing assets. ROA shows that the management has to focus on firm size, firm age and volatility of stock returns. ROE informs that the investors will look into newlinefirm size, firm age, institutional ownership, non-performing assets, leverage, firm complexity and volatility of stock returns. Whereas in the manufacturing sector, the purchasers focus on adoption of ERM, firm size, firm age and liquidity. ROA showed that management has to give importance to ERM, firm size, firm age, firm complexity, liquidity, and leverage. ROE revealed that the investors look into firm size, firm newlinecomplexity, liquidity and leverage. These findings are of particular interest newlineto investors, researchers and practising managers in the financial services and manufacturing sector. newline