ASSESSING THE IMPACT OF ACCOUNTING INFORMATION ABOUT COMPANIES ON THEIR STOCK QUOTES: AN EMPIRICAL ANALYSIS OF THE ACTIVITIES OF COMPANIES PARTICIPATING IN KUWAIT AND SAUDI ARABIA STOCK EXHANGES
Article Sidebar
Main Article Content
Abstract
Market Share Prices have important roles in determining the performance of the companies. Companies aim continuously to have a high market share prices for many goals. Therefore, understanding all variables that affect share prices is vital for investors. To examine if the Accounting Information affects market share prices, we studied the effect of some financial ratios determined from accounting statements on share prices for listed firms on Kuwait Stock Exchange and Saudi Stock Exchange. For Kuwait stock exchange, the quantitative methodology relied on the panel multiple regression through compiling and analyzing the Accounting Information and Market Share Price using secondary data for the period 2011 – 2018. The independent variables are Return on Equity (ROE), Earning per Share (EPS), and Dividend per Share(DPS) and the dependent variable is Market Share Price (MSP) of premier listed companies on Kuwait stock exchange. The analysis of the coefficient of correlation (R) shows that the correlation is very strong among DPS and EPS, DPS and ROE, EPS and ROE whilst it is strong among MSP and ROE, MSP and DPS, and EPS and MSP. Moreover, the variation of the three variables affects strongly the variation of MSP significantly on 1%. Therefore, there is a cause-effect relation between Accounting Information and MSP. Moreover, this paper examines the impact of return and leverage ratios on the Market Share Price of listed firms on Saudi Stock Exchange. The panel-data approach of fixed effect is used during the period of 2015 to 2018. To achieve the purpose of research return on equity as a proxy for profitability information, debt to equity ratio as a proxy for profitability ratio and natural logarithm of total assets as a proxy for the firms’ size are considered as dependent variables while market share price is considered as an independent variable. The results indicate that debt ratio and degree of financial leverage is negatively determining the share price while size has significant positive impact on the share. Debt to equity ratio is insignificant in effecting share price.
Article Details
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
Peavler, R. (2017). How to calculate market price per share [Electronic resource]. URL: https://www.thebalance.com/what-is-the-market-price-pershare-393220.
Zeytinolu, E, Yasemin, A., Sibel, Ç. (2012). International Research Journal of Finance and Economics, (84).
Damodaran, Aswath (2007). Return on Capital (ROC), Return on Invested Capital (ROIC) and Return on Equity (ROE): Measurement and Implications [Electronic resource] // Stern School of Business. URL: http://ssrn.com/abstract=1105499.
Kabajeh, M., AL Nu’aimat ,S. Dahmash, F. (2012). The Relationship between the ROA, ROE and ROI Ratios with Jordanian Insurance Public Companies Market Share Prices. International Journal of Humanities and Social Science (2).
AL Khalayleh, M. (2001). The Relationship between Accounting Performance Indexes and Market Performance Indexes, An Applied Study on Listed Corporations at Amman Security Exchange, Administrative Sciences Studies Magazine, Jordan University, Amman, (1).
Abu Hashish, K. (2003). The Role of Published Accounting Information in Predicting of Stock Prices, An Applied Study on Listed Corporations on Amman Stock Exchange, Al Basa’er Magazine : Petra University, Amman, (2).
Abu Shanab, S. A. (2008). The Impact of Returns and Risks on share prices, An Applied Study on Industrial Corporations listed at Amman Stock Exchange, unpublished Doctorate Thesis, Arab Amman University For Higher Studies, Amman, Jordan.
Seetharaman, A., & Raj, J. R. (2011). An empirical study on the impact of earnings per share on stock prices of a listed bank in Malaysia. The International Journal of Applied Economics and Finance, (3).
Khan, M., & Amanullah. (2012). Determinants of share prices at Karachi stock exchange. International Journal of Business & Management Studies, (4), 1309–1347.
Malhotra, N., & Tandon, K. (2013). Determinants of stock prices: Empirical evidence from NSE 100 companies. IRACSTInternational Journal of Research in Management & Technology (IJRMT), (3), 86–95.
Almumani, M. A. (2014). Determinants of equity share prices of the listed banks in Amman stock exchange: Quantitative approach. International Journal of Business and Social Science, (1), 91–104.
Sharma, S. (2011). Determinants of equity share prices in India. Journal of Arts, Science & Commerce, (4), 51–60.
Somoye, R. O. C., I. R Akintoye, Oseni, J. E. (2009). Determinants of Equity Prices in the Stock Markets, International Research Journal of Finance and Economics, (30), 177–189.
Rahgozar, R. (2011). Relationship Between Total Stock Returns and Stock Prices, with Selected Financial Variables, Market Risk, and their Variations, Midwest Finance Association Chicago, 2–5.
Anwar, J. & Rahmalia, L. (2019). The effect of return on equity, earning per share and price earning ratio on stock prices. The Accounting Journal of Binaniaga, (4). 57.
Ehrhardt, M. and Brigham, E., (2003). Corporate finance – A focused approach. In Capital structure and firm value a study of split-capital closed-end funds in the UK, City University Business School. Johannes H. de We & Dhanraj, K. (2007). Unlocking shareholder value by moving closer to the optimal capital structure, Accountancy SA, Accounting and Tax Predictions, 28–32.
Messbacher, U. (2004). Does capital structure influence firms value?, University of Ulster.
Nirmala, P. S., Sanju, P. S. & Ramachandran, M. (2011). Determinants of share prices in India. Journal of Emerging Trends in Economics and Management Science (JETEMS), (2), 124–130.
Modigliani, F. & Miller, M. (1963). Corporate income taxes and the cost of capital: A correction, American Economic Review, (53), 433–443.
Chowdhury, A. & Chowdhury, S. P. (2010). Impact of capital structure on firm’s value: Evidence from Bangladesh, BEH – Business and Economic Horizons, (3), 111–122.
Barakat, A. (2014). The Impact of Financial Structure, Financial Leverage and Profitability on Industrial Companies Shares Value, BEH – Business and Economic Horizons, (5), 55–66.
Siyanbola, T. T. & Adedeji, S. B. (2014). Financial accounting. Ibadan, Gbola-Ade Printer Company.
Gordon, M. J. (1963). Optimal investment and financing policy. Journal of Finance, (2).
Khan, K. I. (2012). Effect of dividends on stock prices – A case of chemical and pharmaceutical industry of Pakistan. Management, (5).
Okoye, E. I., Amahalu, N. N., Nweze, C. L., Obi, J. C. (2016). Effect of financial leverage on dividend policy of quoted conglomerates. Managing diversification for sustainable development in sub-saharan Africa, Faculty of Management Sciences, International Conference, November, 2016, 810.
Amahalu, N. N., Agbionu, U. C., Obi, C. J. (2017). Effect of human resource accounting on profitability of selected quoted telecommunication firms in Nigeria. Contemporary Issues in Business Management: A Multidisciplinary Approach, 410–443.
Mgbame, C.O. & Ikhatua, J. I. (2013). Accounting information and stock price volatility in the Nigerian capital market: A garch analysis approach. International Review of Management and Business Research, 2(1).
AL Taher, M. (2003). Profits Distribution Policy and its Impact on the Market Stock Price, An Applied Study on one sample of Commercial Banks at Amman Security Exchange, Beit Lahem University Magazine, (22).
Miller, M. & Modigliani, F. (1961). Dividend policy, growth, and the valuation of shares. The Journal of Business, (4).
Abdullah (2015). The impact of financial leverage and market size on stock returns on the Dhaka stock exchange: Evidence from selected stocks in the manufacturing sector, International Journal of Economics, Finance and Management Sciences, (1), 10–15.
Perveen, S. (2019). Value Relevance of Accounting Information: An Empirical Analysis of Banking Sector of Pakistan. Journal of Marketing and Information Systems, (2), 10–17.
Hejase, A. J. & Hejase, H. J. (2012). Research Methods. A practical approach for Business Students. Beirut: Dar Sader.
Allison, P. D. (2009). Fixed effects regression models. Los Angeles: Sage.
Tabachnick, B. G., & Fidell, L. S. (2001). Using Multivariate Statistics (4th ed.). Boston, MA: Allyn and Bacon
Menard, S. (1995). Applied Logistic Regression Analysis: Sage University Series on Quantitative Applications in the Social Sciences. Thousand Oaks, CA: Sage.
Huber, E. & Stephens, J. D. (1993). Political Parties and Public Pensions: A Quantitative Analysis, Acta Sociologica, (36), 309–325.