How earning per share (EPS) affects on share price and firm value

Md. Rashidul Islam, Tahsan Rahman Khan, Tonmoy Toufic Choudhury, Ashique Mahmood Adnan

Research output: Contribution to journalArticlepeer-review

Abstract

Earnings per Share (EPS) is generally considered most important factor to determine share price and firm value. Literature shows that most of the individual investors take their individual investment decision based on the EPS. This paper attempts to provide empirical evidence on how EPS affect the share price movement. We have collected and analyzed 22 scheduled banks 110 firm year data and found that share price does not move as fast as the EPS move. We also further found that the share price movement depends on micro and macro economic factors on the economy. We suggest that investors must consider other factors as well as EPS in order to invest in the security market. Earnings per Share (EPS) is generally considered most important factor to determine share price and firm value. Literature shows that most of the individual investors take their individual investment decision based on the EPS. This paper attempts to provide empirical evidence on how EPS affect the share price movement. We have collected and analyzed 22 scheduled banks 110 firm year data and found that share price does not move as fast as the EPS move. We also further found that the share price movement depends on micro and macro economic factors on the economy. We suggest that investors must consider other factors as well as EPS in order to invest in the security market.
Original languageEnglish
Pages (from-to)97-108
Number of pages12
JournalEuropean Journal of Business and Management
Volume6
Issue number17
Publication statusPublished - 2014

Keywords

  • banks and banking
  • earnings per share
  • investments
  • stocks

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