Linking Financial Performance to Market Valuation in Mid-Cap Firms

Abstract

This study investigates the relationship between corporate performance and firm value in the context of mid-cap companies, employing Structural Equation Modeling (SEM) as the primary analytical tool. Mid-cap firms, often characterized by their growth potential and moderate market capitalization, present a unique setting to explore how operational efficiency, profitability, and strategic management practices translate into enhanced firm value. Using SEM, the research disentangles direct and indirect effects of performance indicators—such as return on assets, revenue growth, and market share—on firm valuation metrics. The findings are expected to provide empirical evidence on the causal pathways linking corporate performance to firm value, offering insights for managers, investors, and policymakers. By focusing on mid-cap companies, the study contributes to bridging the gap between large-cap stability and small-cap volatility, highlighting the strategic importance of performance optimization in sustaining firm value.