Measuring firm performance: Testing a proposed model

Abstract

Firm performance is a very complex and exhaustive concept. It can be related to many factors: starting with variables from balance sheet, income statement or cash-flow statement, continuing with research and development expenses or IT competences, and last but not least with intangible assets like human capital, goodwill, or brand value. The purpose of the present paper is to develop and test a model in order to measure firm performance by considering US companies that are ranked into the Global Fortune 500. In this study we used control variables (assets growth rate, net income growth rate and revenue growth rate) and depended variables - return on assets (ROA), debt to equity, research and development expenses to total operating expenses, environment, social and governance rating, Tobin`s q - to measure firm performance. The article`s findings suggest that when analyzing the firm performance much more factors must be considered.