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The Relationship between Stock Price and EPS: Evidence Based on Taiwan Panel Data

Author

Listed:
  • Chi-Wei Su

    (Department of Finance, Providence University,Taichung, Taiwan)

  • Ya-Wen Chang

    (Department of Finance, Providence University,Taichung, Taiwan)

  • Yahn-Shir Chen

    (Department of Accounting, National Yunlin University of Science and Technology, Yunlin, Taiwan)

  • Hsu-Ling Chang

    (Department of Accounting and Information, Lin Tung University, Taichung, Taiwan)

Abstract

In this study, we use panel cointegration methods to investigate the relationship between stock prices and earnings-per-share (EPS). Furthermore, we consider whether stock prices respond to EPS under the different level of growth rate of operating revenue. The empirical result indicated that the cointegration relationship existed between stock prices and EPS in the long-run. Furthermore, we found that for the firm with a high level of growth rate, EPS has less power in explaining the stock prices however, for the firm with a low level of growth rate, EPS has a strong impact in stock prices.

Suggested Citation

  • Chi-Wei Su & Ya-Wen Chang & Yahn-Shir Chen & Hsu-Ling Chang, 2008. "The Relationship between Stock Price and EPS: Evidence Based on Taiwan Panel Data," Economics Bulletin, AccessEcon, vol. 3(30), pages 1-12.
    • Handle: RePEc:ebl:ecbull:eb-08c30034
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    Cited by:

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    2. Brian Basvi, 2024. "Evaluating the Effect of Fundamental Analysis on Earnings Per Share Concept in Stock Valuation in the Zimbabwe Stock Exchange Market," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 11(5), pages 531-550, May.
    3. Taibat A. Atoyebi & Yinka M. Salaudeen & Jerry Y. A. Onyilokwu, 2018. "International Financial Reporting Standards Adoption and Value Relevance of Financial Information of Quoted Healthcare Firms in Nigeria," Applied Economics and Finance, Redfame publishing, vol. 5(4), pages 174-184, July.
    4. Selahattin GURIS & Aynur PALA, 2014. "Equity Returns, Firm-Specific Characteristics and Sector Rotation: Evidence from Turkey," International Journal of Economics and Financial Issues, Econjournals, vol. 4(2), pages 264-276.
    5. Clement C.M. Akjekwe & Adzor Ibiamke, 2017. "Exploring the Motivation behind Leakage of Internal Audit Reports (Whistle Blowing) in the Public Sector in Kenya," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 7(4), pages 62-70, October.
    6. Arindam Banerjee, 2019. "Predicting Stock Return of UAE Listed Companies Using Financial Ratios," Accounting and Finance Research, Sciedu Press, vol. 8(2), pages 214-214, May.
    7. Lorenzo Valdés Arturo & Durán Vázquez Rocío, 2010. "Ohlson model by panel cointegration with Mexican data," Contaduría y Administración, Accounting and Management, vol. 55(3), pages 131-142, septiembr.
    8. Aynur Pala, 2014. "The Effect of Valuation Ratios, Gold Price, and Petroleum Price on Equity Returns: A Comparison of Static Panel and Quantile Regressions," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(1), pages 80-89, January.
    9. Marek Szajt, 2009. "Estimation of Disproportions in Patent Activity of OECD Countries Using Spatio-Temporal Methods," Dynamic Econometric Models, Uniwersytet Mikolaja Kopernika, vol. 9, pages 91-98.
    10. Hakkı Öztürk & Tolun A. Karabulut, 2018. "The Relationship between Earnings-to-Price, Current Ratio, Profit Margin and Return: An Empirical Analysis on Istanbul Stock Exchange," Accounting and Finance Research, Sciedu Press, vol. 7(1), pages 109-109, February.
    11. Richard Grabowski & Sharmistha Self, 2020. "Structural change in Asia, the real effective exchange rate, and agricultural productivity," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 44(1), pages 198-210, January.

    More about this item

    Keywords

    Earnings Response Coefficient (ERC);

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • G1 - Financial Economics - - General Financial Markets

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