The Significance of Retained-Earnings-based Firm Valuation Model During Military Regime Era in Pakistan

An empirical evaluation of the adopted but a modified version of the firm valuation equation has been conducted to test the retained earnings-based firm valuation model including retained earnings, firm value, and shareholders' wealth as variables. The impact of retained earnings on firm value and shareholders' wealth as well as firm value on shareholders' wealth has been evaluated by using primary data collected randomly from 85 listed manufacturing firms using a questionnaire. The alpha score of .866 has been generated relating constructs of the research instrument. Furthermore, factor analysis and ordinary least squares regression has been used to test study hypotheses. Study findings suggested that retained earnings have played a vital role in the expansion activities and benefited sample firms in achieving desired growth. Moreover, the value of sample firms enhanced and shareholders' wealth maximized due to investment and reinvestment of retained earnings in value-enhancing projects. Thus, results have applauded the Musharraf government and concomitantly validated the strength of retained earnings-based firm valuation model. Disciplinary: Management Science (Corporate Finance & Investment vertical bar), Mathematical & Econometric Modeling & Analysis. (C) 2021 INT TRANS J ENG MANAG SCI TECH.