Identifying Qualitative Variables for Management Value Creation: A Text Mining Clustering Approach

Resumen

Firm value is one of the most studied aspects within business economics. Specifically, from the perspective of business management, it is essential to identify the variables that impact on a company's value in order to act on them and thus fulfil its fundamental purpose, value creation. Moreover, knowing the real value of a firm is decisive in the context of financial investing. When valuing a company, the most commonly used method is the discounted cash flow approach, which only takes into account quantitative variables. However, an increasing number of authors defend the importance of developing models that include intangible or qualitative elements in business valuation. The inclusion of these variables has a twofold objective: (1) to reduce the gap between book value and market value; and (2) to identify the variables that firm managers can act upon when seeking value creation. Despite the increasing importance of these variables in the literature, we did not find a standardized list of the intangible elements that should be included in the valuation process. The aim of this study is to analyze all the qualitative variables that have been studied in the literature regarding firm value using a bibliometric review and data mapping process. Using the visualization tool VOSviewer, we apply text mining as a novel method of content analysis, relying on Business Economics research from the Web of Science database between 2000 and 2022, covering 843 papers. In order to explore the variables analyzed in the literature, we conducted a co-occurrence analysis based on text data obtained form papers’ abstracts. By choosing a full counting method with a 20 term occurrence threshold, we obtained 5 clusters of most studied variables regarding firm value: business management and strategy variables, corporate social responsibility and reporting variables, corporate governance and CEO related variables, finance and quantitative variables and, finally, ownership structure variables. Furthermore, we conclude that the most analyzed variables are currently those related to corporate social responsibility and gender diversity, unlike in the past when variables related to ownership or cost were more analyzed. Regarding further research possibilities, we believe that one important step would be to apply the required tools that allow us to select from all the variables analyzed and clustered, a standardized list of those that are really decisive and should be included in the development of a valuation method that includes not only quantitative variables, but also qualitative ones.