<p><a href="https://en.wikipedia.org/wiki/Tobin%27s_q" rel="nofollow noreferrer">Tobin's q</a> is defined as the ratio between the market value of the firm over the replacement cost of its assets.</p>
<p>If you use <a href="https://wrds-www.wharton.upenn.edu/" rel="nofollow noreferrer">WRDS</a>, you can calculate it as follows:</p>
<p>Tobin's q = (AT + (CSHO ∗ PRCC_F) − CEQ) / AT</p>
<p>Where</p>
<ol>
<li>AT is Total Assets from Compustat/Fundamentals/Balance Sheet Items</li>
<li>CSHO is net number of all common shares outstanding from Compustat/Fundamentals/ Miscellaneous Items</li>
<li>PRCC_F is closing stock price from fiscal year yend from Compustat/Fundamentals/Supplement Data Items</li>
<li>CEQ is book value of common equity from Compustat/Fundamentals/Balance Sheet Items</li>
</ol>
<p>Please note that this assumes that the market value of liabilities is equal to the book value of liabilities. If not, you would want the market value of liabilities + shareholders equity in the numerator, and you'd have to get that in the numerator.</p>
<p>Also consider <a href="https://researchfinancial.wordpress.com/2016/08/24/total-q-and-tobins-q/" rel="nofollow noreferrer">Total q</a> as an alternative to Tobin's q, which can similarly be calculated from Compustat.</p>
<p>Not sure that these rise to the level of citable references, but here three different websites using this approach:</p>
<ol>
<li><a href="https://groups.google.com/g/wrdssas/c/SIhYR82VXBU" rel="nofollow noreferrer">Google Group</a></li>
<li><a href="https://www.wiwi.uni-muenster.de/uf/sites/uf/files/2017_10_12_wrds_data_items.pdf" rel="nofollow noreferrer">WRDS: Data Items - wiwi.uni-muenster.de</a></li>
<li>Most citable: <a href="https://www.aeaweb.org/articles?id=10.1257/jep.31.3.67" rel="nofollow noreferrer">Stulz and Kahle (JEP 2017)</a> use Tobin's Q in their paper and define Tobin's q using Compustat data in their online appendix <a href="https://www.aeaweb.org/content/file?id=4992" rel="nofollow noreferrer">here</a> in exactly the same way.</li>
<li><a href="https://mingze-gao.com/measures/tobin_q/" rel="nofollow noreferrer">Mingze Gao</a>, note slightly different formula that accounts for firms with preferred shares, and deferred taxes and the investment tax credit.</li>
</ol>

CC BY-SA 4.0
2021-06-29T17:05:07.653Z
Thank you very much! This is very helpful. Do you have any paper or textbook reference that I can cite for this formula? Thanks!
ExcitedSnail
CC BY-SA 4.0
2021-06-29T09:56:06.290Z
2021-06-29T17:24:48.033Z
2021-06-29T17:24:48.033Z
BKay
<p>I'm interested in doing some empirical analysis of firm's investment behavior using financial statements (such as asset, working capital, operating cost, etc). One variable I want to manually construct is Tobin's Q. How can I calculate <a href="https://en.wikipedia.org/wiki/Tobin%27s_q" rel="nofollow noreferrer">Tobin's q</a> from the financial statement of publicly listed companies?</p>

<finance><corporate-finance><empirical-evidence><data>
Calculating Tobin's q from the financial statements of publicly listed companies
ExcitedSnail
# Calculating Tobin's q from the financial statements of publicly listed companies

(Asked by: username_0 on 2021-06-27)

I'm interested in doing some empirical analysis of firm's investment behavior using financial statements (such as asset, working capital, operating cost, etc). One variable I want to manually construct is Tobin's Q. How can I calculate [Tobin's q](https://en.wikipedia.org/wiki/Tobin%27s_q) from the financial statement of publicly listed companies?

**Tags:** finance, corporate-finance, empirical-evidence, data


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## 1 answers

### Answer by username_1 on 2021-06-29. Score: 4 | Accepted answer

[Tobin's q](https://en.wikipedia.org/wiki/Tobin%27s_q) is defined as the ratio between the market value of the firm over the replacement cost of its assets.

If you use [WRDS](https://wrds-www.wharton.upenn.edu/), you can calculate it as follows:

Tobin's q = (AT + (CSHO ∗ PRCC\_F) − CEQ) / AT

Where

1. AT is Total Assets from Compustat/Fundamentals/Balance Sheet Items
2. CSHO is net number of all common shares outstanding from Compustat/Fundamentals/ Miscellaneous Items
3. PRCC\_F is closing stock price from fiscal year yend from Compustat/Fundamentals/Supplement Data Items
4. CEQ is book value of common equity from Compustat/Fundamentals/Balance Sheet Items

Please note that this assumes that the market value of liabilities is equal to the book value of liabilities. If not, you would want the market value of liabilities + shareholders equity in the numerator, and you'd have to get that in the numerator.

Also consider [Total q](https://researchfinancial.wordpress.com/2016/08/24/total-q-and-tobins-q/) as an alternative to Tobin's q, which can similarly be calculated from Compustat.

Not sure that these rise to the level of citable references, but here three different websites using this approach:

1. [Google Group](https://groups.google.com/g/wrdssas/c/SIhYR82VXBU)
2. [WRDS: Data Items - wiwi.uni-muenster.de](https://www.wiwi.uni-muenster.de/uf/sites/uf/files/2017_10_12_wrds_data_items.pdf)
3. Most citable: [Stulz and Kahle (JEP 2017)](https://www.aeaweb.org/articles?id=10.1257/jep.31.3.67) use Tobin's Q in their paper and define Tobin's q using Compustat data in their online appendix [here](https://www.aeaweb.org/content/file?id=4992) in exactly the same way.
4. [Mingze Gao](https://mingze-gao.com/measures/tobin_q/), note slightly different formula that accounts for firms with preferred shares, and deferred taxes and the investment tax credit.

> **Comments:**
> **username_0**: Thank you very much! This is very helpful. Do you have any paper or textbook reference that I can cite for this formula? Thanks!  

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