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 from the financial statement of publicly listed companies?


1 Answer 1


Tobin's q is defined as the ratio between the market value of the firm over the replacement cost of its assets.

If you use WRDS, you can calculate it as follows:

Tobin's q = (AT + (CSHO ∗ PRCC_F) − CEQ) / AT


  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 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
  2. WRDS: Data Items - wiwi.uni-muenster.de
  3. Most citable: Stulz and Kahle (JEP 2017) use Tobin's Q in their paper and define Tobin's q using Compustat data in their online appendix here in exactly the same way.
  4. Mingze Gao, note slightly different formula that accounts for firms with preferred shares, and deferred taxes and the investment tax credit.
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    $\begingroup$ Thank you very much! This is very helpful. Do you have any paper or textbook reference that I can cite for this formula? Thanks! $\endgroup$ Commented Jun 29, 2021 at 17:05

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