Calculating the Market Value of Leadership
Harvard Business Review
APRIL 3, 2015
In recent years, investors have learned that defining the market value of a firm cannot just be based on finances. GAAP and FASB standards require financial reporting of earnings, cash flow, and profitability – all measures that investors have traditionally examined. But recently, these financial outcomes have been found to predict only about 50% of a firm’s market value. Wise, long term investors recognize that leadership affects firm performance.