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Firm Performance Indicators as a Fundamental Analysis of Stocks and a Determinant of a Firm’s Operation

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  • Sakchai Naknok

Abstract

Purpose: The aim is to analyze which financial instruments effectively determine firm performance as key indicators of business success and the fundamental analysis of stocks. Design/methodology/approach: The study analyzed firm performance using financial statements for 100 listed Thailand companies via 513 observations during the period 2016-2020, including the economic COVID-19 crisis. The methodology was divided into two stages, at identifying the relevant dimensions of financial tools and firm size on firm performance using the ordinary least square regression logarithm. During the second stage, quantile regression was used to evaluate financial instruments as a determinant of firm performance using a set of regression functions to non-normal errors and outliers. Findings: The ordinary least square results indicated that both the price earnings ratio and book-to-market ratio are significantly negative determinants of firm performance. The interest coverage ratio was a positive determinant of earnings per share. Meanwhile, the price earnings ratio, book-to-market ratio, and interest coverage ratio were also main determinants of firm performance in both earnings per share and return on equity in all quantiles of the firm. Practical implications: The finding not only identifies firm performance indicators to propel an organization’s capability, but also motivates that managers should make to evaluate operating results to effectively deal with a company’s high performance. These indicators truly provide insight into the operation of the business by reflecting on the operation to maintain professional boundaries to earn profit that benefits both investors’ decision and shareholders. Originality/value: The novelty of this paper lies on the differently distinguished performance companies in Thailand. These investigations enrich the perception of firm performance indicators that motivate whether a company fully manages its operation to generate profit. The price earnings ratio, book-to-market ratio, interest coverage ratio, and firm size have been assessed to be outstanding indicators to contribute effective strategy of firm performance. Most investors consider fundamental value as an indicator of a firm’s performance in order to investing decisions in the stock market.

Suggested Citation

  • Sakchai Naknok, 2022. "Firm Performance Indicators as a Fundamental Analysis of Stocks and a Determinant of a Firm’s Operation," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(1), pages 190-213.
    • Handle: RePEc:ers:ijebaa:v:x:y:2022:i:1:p:190-213
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    1. Md. Yousuf Ahammed & Md. Ariful Haque Chowdhury & Md. Tahidur Rahman & Shayla Tazminur, 2024. "Financial Indicators Shaping Share Price Movement: Insight from the Dhaka Stock Exchange SME Board," International Journal of Economics and Financial Issues, Econjournals, vol. 14(6), pages 267-272, October.

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    More about this item

    Keywords

    Firm performance; fundamental analysis; quantile regression.;
    All these keywords.

    JEL classification:

    • B26 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Financial Economics
    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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