Law Commons^™

The Misuse Of Tobin’S Q, Robert Bartlett, Frank Partnoy

Vanderbilt Law Review

In recent years, scholars have addressed the most important topics in corporate law based on a flawed assumption: that the ratio of the market value of a corporation’s securities to their book value is a valid measure of the value of the corporation. The topics have included staggered boards, incorporation in Delaware, shareholder activism, dual-class share structures, share ownership, board diversity, and other significant aspects of corporate governance. We trace the history of this flawed assumption, and document how it emerged from Tobin’s q, a concept from an unrelated area in macroeconomics. We show that scholars have misused Tobin’s q, …