An Investigation on Relation of Firm's Value with Inflation Rate Using Tobin's Q Index for Tehran Stock Exchange during 1994-2004

Process of decision making needs to be analyzed because the effects of important factors in investing environment must be considered. These factors are macroeconomic factors such as Inflation rate. Investors tend to invest in firms where they are more valuable. One index that is used to calculate the value of firms is Tobin's Q index. Based on this, the main hypothesis of this research expresses that there is a relation between firm's value and the inflation rate. The literature is gathered by library research and for the analysis, the inductive and deductive methods are used to accept or reject the hypothesis, and the relation between Tobin's Q index with inflation rate is assigned by the analysis of the amount of correlation and regression. Statistical population of the research included 285 firms. According to the results of the test, there is no relation between firm's value with inflation rate in 11 years and the coefficient of correlation is meaningless. Also testing the subsidiary hypotheses shows that the effect of inflation rate on the firm's value is not approved.