Measuring Firms Intrinsic Values in an Emerging Economy: Evidence from Bangladesh

Abstract

This study considered three parameters to measure firms’ intrinsic values: corporate governance, paid-up capital size, and dividend payout policy. These were used as independent variables, and market interest rate was used as the control variable. To measure these parameters, daily trade data was observed from both the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE) data repositories and covered a total of 1475 firm years’ disclosures from 2013 to 2017 to conclude the analysis. The study revealed that there is a significantly negative correlation with firms’ intrinsic values and corporate governance due to the majority of firms failing to adhere to corporate governance guidelines and therefore generate higher intrinsic values. Also, firms in emerging economies are characterized by a high level of family ownership and lack of transparency. Similarly, there is a significant negative relationship with firms’ intrinsic values and higher capital-based firms, and there is no significant relationship with the firms’ intrinsic values and dividend payout policies in the emerging economy.