Using data from 43 countries for the period of 1992-2018, we show that growth opportunities explain the cross-country difference in firm value more than profitability. We measure their relative importance in the country-wide corporate valuation using the cross-sectional relation between firm value and free cashflows within the country (FCF beta). A positive FCF beta in a country means that, in the country, firm value increases with profits kept internally, whereas a negative FCF beta means that firm value increases with growth opportunities funded externally. Our finding is that, across countries, those with a more negative FCF beta have a higher valuation. This relation is sharper (absent) when both the country-wide valuation and the FCF beta are estimated with growth (mature) firms in the country, further confirming the role of growth opportunities. 

Keywords: Valuation; Country; Growth opportunities; Free cashflow

JEL classification: F30; F65; G30​