Figure - available via license: Creative Commons Attribution 4.0 International
Content may be subject to copyright.
Source publication
This research investigates the relationships between Net Profit Margin (NPM), Debt-to-Equity Ratio (DER), Earnings per Share (EPS), and stock prices within the context of the Indonesian stock market. Utilizing a quantitative analysis approach, the study employs panel data regression to assess the statistical significance of these financial metrics...
Context in source publication
Context 1
... The Chow Test in Table 2 determines whether a fixed effects model is more appropriate than a pooled ordinary least squares (OLS) model. The results of the Chow Test include two main components: the Cross-section F test and the Cross-section Chi-square test, each of which assesses the significance of cross-sectional effects in the data. ...Similar publications
Accurate stock prediction plays an important role in financial markets and can aid investors in making well-informed decisions and optimizing their investment strategies. Relationships exist among stocks in the market, leading to high correlation in their prices. Recently, several methods have been proposed to mine such relationships in order to en...
Citations
... Yet, empirical evidence on the market valuation behaviour of firms in these sectors remains scarce and fragmented. EPS, aligns with the Signalling Theory (Spence, 1973) as a tool used by managers to communicate firm value to external investors and recent empirical studies also corroborate this position (Ferniawan et al., 2024;Gharaibeh et al., 2022;Muslim et al., 2024). In efficient markets, a high EPS should convey strong fundamentals, thereby increasing share price. ...
This study investigates the dynamic determinants of share price among listed firms in Nigeria's Consumer Goods and Agriculture sectors using a decade-long panel dataset covering the period from 2012 to 2023. Anchored on the theoretical perspectives of the Efficient Market Hypothesis, Signalling Theory, and Agency Theory, the study evaluates how firm-specific indicators such as earnings per share (EPS), return on equity (ROE), current ratio, debt-to-equity ratio, and total asset turnover, as well as macroeconomic variables like exchange rate and GDP per capita, influence share price in an environment characterised by institutional inefficiencies and information asymmetry. The empirical analysis begins with a static panel regression using the Fixed Effects model to establish a baseline understanding. To improve robustness and account for econometric challenges such as endogeneity, serial correlation, and unobserved heterogeneity, the study adopts the two-step System Generalised Method of Moments (System GMM) as the main estimation technique. The dynamic model reveals strong persistence in share price, as lagged share price is significantly associated with current values. While EPS shows a positive and significant effect in the static model, the dynamic GMM results indicate a negative and significant relationship, suggesting that reported earnings may reflect investor scepticism or earnings manipulation, particularly in contexts with weak governance oversight. Other variables, including ROE, leverage, and macroeconomic indicators, remain statistically insignificant in the dynamic specification. Year effects are incorporated to control for time-specific macro shocks. This study contributes to frontier market finance literature by offering sector-specific insights and demonstrating the added value of dynamic modelling. It also cautions investors and policymakers against excessive reliance on earnings-based metrics without adequate consideration of the institutional environment.
