A Study on the Association between Factory Operating Rate and Firm Value

The operating rate shows how well a factory operates. Reports of media and financial analysts often refer to the operating rate for their analyses, and this study empirically verifies whether firm value increases as the operating rate increases for firms listed on Korean Stock Exchanges from 2015 to 2018. Furthermore, we analyze the mediating effect of fixed costs, research, and development (R&D) costs, and industrial competitiveness and verify whether the change in operating rate provides information about future profits. We find that the operating rate is positively associated with firm value. When fixed costs and R&D costs increase, the positive association is strengthened. Moreover, the positive relation varies depending on the degree of market competition. Lastly, changes in the operating rate provide information for forecasting future earnings. This study provides useful information for investors by verifying the association between the operating rate and firm value considering firm characteristics.