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The Influence of Sustainable Earnings on Stock Price: Evidence from Publicly Listed Vietnamese Business Enterprises

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  • Nung Hong Do

    (National Economics University, 207 Giai Phong Road, Hai Ba Trung District, 100000 Hanoi, Vietnam)

  • Nha Van Tue Pham

    (National Economics University, 207 Giai Phong Road, Hai Ba Trung District, 100000 Hanoi, Vietnam)

Abstract

Expected earnings and stock price are important determinants of investors’ decision. This research is conducted to estimate earnings persistence and examine the relationship between sustainable earnings on price-to-earning (P/E) ratio based on financial statements’ information of 631 publicly listed non-financial companies on Vietnam’s stock market, by using Ordinary Least Squares (OLS) and Logit function. The results show that earnings persistence depends on net operating assets growth, profit margin changes, operating asset turnover changes and past profitability. Besides, both the sustainable and unsustainable components of earnings growth are proved to empirically affect P/E ratio, even though investors underreact to sustainable earnings and overreact to unsustainable earnings. This study helps to improve investors’ perception of their future earnings, investment value and companies’ sustainable growth, particularly in the context of developing stock market of Vietnam which is full of market anomalies.

Suggested Citation

  • Nung Hong Do & Nha Van Tue Pham, 2020. "The Influence of Sustainable Earnings on Stock Price: Evidence from Publicly Listed Vietnamese Business Enterprises," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 16(2), pages 101-121.
    • Handle: RePEc:usm:journl:aamjaf01602_101-121
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    References listed on IDEAS

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