Sample Data and Model Variables The theoretical relationship established between firm’s performance and its determinants (equation 1 and 2) are empirically tested through yearly observations gathered from public accounts of 51 manufacturing sectors firms of Pakistan, listed on Pakistan Stock Exchange, published in their annual reports. The data period for subject firms ranges from year 2012 to 2016 and includes various sectors such as sugar, textile, food, chemical, petroleum, paper and engineering goods. As discussed under the theoretical framework of this study, there are quite a few proxies available for the composition of our model regressand i.e., Tobin’s Q. However, keeping in view the theoretical settings of this paper and comparability with our set of explanatory variables, we employ following two measures of Tobin’s Q only (i) the first measure takes into account equity (only) as mode of firm’s capital, and, (ii) the second one takes a more holistic approach by incorporating both equity and debt as source of firm’s financing. Based on two different modes of firm’s financing, this paper follows below given two distinct compositions of Tobin’s Q. (1)′ π1π‘ = π΅πππ ππππ’π ππ πππ‘ππ π΄π π ππ‘ + ππππππ‘ ππππ’π ππ πΈππ’ππ‘π¦ − π΅πππ ππππ’π ππ πΈππ’ππ‘π¦ π΅πππ ππππ’π ππ πππ‘ππ π΄π π ππ‘ For our study, the firm performance (ππ‘ ) is comprised of scale efficiency (π π¦ ) and cost efficiency (π π ). Gross Profit is the yield of net sales minus cost of goods sold. The book value of total asset is fixed assets less intangible assets. The book value of total equity comprises of total asset less total liabilities. The market value of equity is calculated through the number of outstanding shares multiplied by market price. The market price for each share price is taken on yearly average basis from Khistock website. On Part of model regressors, two proxies are used each for scale efficiency (π 1π¦π‘ and (π 2π¦π‘ ) and cost efficiency (π 1ππ‘ and π 2ππ‘ ). The first measure of scale efficiency (π 1π¦π‘ ) is the ratio of firm’s gross profit to the book value of its total assets. Here, gross profit is the yield of net sales minus cost of goods sold. Replacing the denominator of first measure (i.e., book value of total assets) with firm’s net sales yields the second measure of scale efficiency (π 2π¦π‘ ). (3) πΊπππ π ππππππ‘ π 1π¦π‘ = π΅πππ ππππ’π ππ πππ‘ππ π΄π π ππ‘ , π 2π¦π‘ = πΊπππ π ππππππ‘ πππππ Talking about the other dimension of firm performance i.e., its cost discipline, its basic measure (π 1ππ‘ ) is represented through the ratio of firm’s operating expenses to the book value of its total assets. Here, operating expense of firm is mainly the summation of its distributive and administrative expense. Once again, interchanging the denominator of first measure (i.e., book value of total assets) with firm’s net sales yields the second measure of (π 2ππ‘ ). (4) ππππππ‘πππ πΈπ₯ππππ π π 1ππ‘ = π΅πππ ππππ’π ππ πππ‘ππ π΄π π ππ‘ , π 2ππ‘ = ππππππ‘πππ πΈπ₯ππππ π πππππ Model 2:- π2π‘ = πΌ + π½1 π·πππ‘π¦π‘ + ππ‘ The Firm performance is measured by π2π¦π‘ = π·πππ‘π‘ = ππππππ‘ ππππ’π ππ πΈππ’ππ‘π¦+π·πππ‘ π΅πππ ππππ’π ππ πππ‘ππ π΄π π ππ‘ πΆπ’πππππ‘ π΄π π ππ‘ − πΆπ’πππππ‘ πΏπππππππ‘πππ + πΏπππ π‘πππ πΏπππππππ‘πππ π΅πππ ππππ’π ππ πππ‘ππ π΄π π ππ‘ ππππππ‘ ππππ’π ππ πΈππ’ππ‘π¦ = ππ’ππππ ππ ππ’π‘π π‘ππππππ π βππππ π₯ ππππππ‘ πππππ
