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Impact of Financial Ratios on Stock Prices of Manufacturing Companies: Evidence from India

Author

Listed:
  • Venugopala Rao Kuntamalla
  • Krishna Jyotreddy Maguluri

Abstract

The present study examines the impact of financial ratios on the stock prices of Indian manufacturing companies. Since the manufacturing sectors play an essential role in the economic development of an emerging market like India, the study results can be helpful for investors looking to invest in India, and, in particular the manufacturing companies operating in the country. The study consists of a balanced panel dataset of selected manufacturing companies from fourteen manufacturing sectors listed on the NIFTY 500 index. The study employs the Prais-Winsten panel regression technique, which uses panel-corrected standard error estimators to analyze the data and derive the necessary empirical outcomes. The results reveal that the valuation ratios, namely market-to-book value, enterprise value multiple, and earnings per share, along with asset efficiency, exhibit a positive and significant relationship with the share prices. On the other hand, dividend payout and leverage exhibit an insignificant relationship with the share prices.

Suggested Citation

  • Venugopala Rao Kuntamalla & Krishna Jyotreddy Maguluri, 2023. "Impact of Financial Ratios on Stock Prices of Manufacturing Companies: Evidence from India," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 169-181.
    • Handle: RePEc:bas:econst:y:2023:i:6:p:169-181
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • B26 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Financial Economics
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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