Do U.S. Firms Trade at a Valuation Premium? A Comparison with European Firms

Abstract

This paper examines whether U.S. firms exhibit a valuation premium relative to devel oped market European firms. This issue is important for understanding cross-country differences in capital allocation and the cost of capital. Using panel data on 701 firms from 2000 to 2025, we estimate a random effects model with Tobin’s Q as the dependent variable. The main contribution is a firm-level U.S.-Europe comparison that combines selected firm characteristics and industry effects. The results show that a statistically significant U.S. valuation premium persists after controlling for the factors included in the model.