DO FINANCIAL FUNDAMENTALS DRIVE FIRM VALUE? THE MODERATING ROLE OF FIRM SIZE IN AN EMERGING MARKET: EVIDENCE FROM THAILAND
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Abstract
This research investigates how financial fundamentals contribute to firm value and examines the moderating role of firm size in an emerging market characterized by economic uncertainty. The analysis covers 2,565 firm-year observations from 579 companies listed on the Stock Exchange of Thailand over the period 2021–2025. Financial information was gathered from Bloomberg databases and publicly available corporate reports. The study employed panel-data regression analysis. Both fixed-effects and random-effects models were estimated, with model selection based on
the Hausman test. Firm-clustered robust standard errors were used to improve
the robustness of the estimation, while profitability (ROA) and firm growth were included as control variables.
Key findings can be summarized as follows:
- Cash flow generated from operating activities emerged as the strongest factor associated with firm value, indicating that investors place considerable emphasis on firms’ ability to sustain internal funding capacity and withstand financial uncertainty.
- Firms with more efficient asset utilization tended to achieve higher market valuations, whereas debt financing did not appear to play a meaningful role in explaining differences in firm value.
- Organizational size showed little evidence of altering the relationships between financial fundamentals and firm value. However, the interaction between operating cash flow and firm size was positive, suggesting that the valuation benefits of strong cash-generation capability become more pronounced among larger firms.
Taken together, the findings indicated that investors increasingly focus on operational effectiveness and long-term cash-generation capacity when assessing corporate value in emerging market environments. These findings contribute to the literature on firm valuation by providing evidence from Thailand and offer practical implications for corporate managers and investors seeking to enhance firm value through stronger operating performance, efficient resource utilization, and sustainable cash-flow management.
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