Financial Fundamentals and Firm Value. Empirical Evidence from U.S. Companies

This study examines the impact of company-level financial indicators on firm value in a developed capital market. Using a dataset consisting of U.S. non-financial companies over a 10-year period, namely 2015-2024, the analysis investigates how performance, indebtedness, liquidity, asset tangibility, sales growth, and company size influence firm value, which is measured using two complementary market-based ratios, price-to-book ratio and price-to-earnings ratio, that capture different aspects of investors’ expectations. A dummy variable is also included to capture the Covid-19 pandemic crisis period and its market-wide effects. The empirical analysis consists of fixed effects regression models estimated using unbalanced panel data. The findings suggest that traditional financial indicators remain significant determinants of company value. Thus, indebtedness, asset tangibility, and sales growth lead to an increase in firm value, while liquidity may decrease company value. Performance and firm size exhibit mixed effects, depending on the valuation measure. The Covid-19 pandemic period is associated with higher valuation multiples, reflecting supportive financial market conditions. These results provide useful insights for investors and financial analysts who rely on accounting-based indicators in valuation models, as well as for corporate managers whose financing decisions influence how companies are priced in capital markets. The findings are also relevant for creditors and policymakers, as they assess how key financial indicators are reflected in company value, particularly during periods of market-wide economic disruption.