Browse > Article
http://dx.doi.org/10.13106/jafeb.2021.vol8.no7.0349

Determinants of Stock Prices in Jordanian Banks: An Empirical Study of 2006-2018  

GHARAIBEH, Omar Khlaif (Finance and Banking Department, Faculty of Economics and Administrative Sciences, Al-alBayt University)
JARADAT, Mahmoud Ali (Finance and Banking Department, Faculty of Economics and Administrative Sciences, Al-alBayt University)
Publication Information
The Journal of Asian Finance, Economics and Business / v.8, no.7, 2021 , pp. 349-356 More about this Journal
Abstract
This study comprehensively investigates whether there is an impact of risk, size, profitability, earnings per share, dividend yield, and book-to-market equity on the stock prices of Jordanian banks listed on the Amman Stock Exchange (ASE) for the period 2006-2018. To mitigate endogeneity concerns and to control for within-bank dynamics, panel data fixed effects estimations are used. This study shows that size (SIZE), profitability (ROA), dividend yield (DY) and book-to-market equity (BE/ME) ratios are statistically significant determinants of stock prices. The risk (RISK) factor measured by volatility of ROA has a positive and significant effect on the stock prices, while earnings per share has minimum influence on the stock prices. The results show that ROA has a significant and positive effect and provides the largest effect among all variables used in this study, while the RISK factor has a positive and significant effect. In contrast, SIZE, DY, and BE/ME have a significant negative effect on stock prices. The paper presented new evidence showing that ROA is a better determinant of stock prices in Jordanian banks, and RISK significantly affects stock prices. The researcher recommends using a factor of profitability represented by ROA which has a significant positive effect on the stock prices in Jordanian banks and applying the ROA variable to other sectors.
Keywords
Firm Size; Profitability; Risk; Dividend Yield; Book to Market;
Citations & Related Records
연도 인용수 순위
  • Reference
1 Irfan, C. M., Nishat, M., & Sharif, H. (2002). Key fundamental factors and long-run price changes in an emerging market: A case study of Karachi Stock Exchange (KSE). The Pakistan Development Review, 5(6), 517-533. https://www.jstor.org/stable/41263366
2 Tandon, K., & Malhotra, N. (2013). Determinants of stock prices: Empirical evidence from NSE 100 companies. International Journal of Research in Management & Technology, 3(3), 2249-9563.
3 Chandra, S., & Veronica, S. (2018). The influence of CR, DER, EPS, ROA, and sales growth on stock prices in manufacturing companies. Bilancia: Jurnal Ilmiah Akuntansi, 2(3), 343-354. http://www.ejournal.pelitaindonesia.ac.id/ojs32/index.php/BILANCIA/article/view/141
4 Sharma, V. (2011). Independent directors and the propensity to pay dividends. Journal of Corporate Finance, 17(4), 1001-1015. https://doi.org/10.1016/j.jcorpfin.2011.05.003   DOI
5 Sanju, P., Ramachandran, M., & Nirmala, P. (2011). Determinants of share prices in India. Journal of Emerging Trends in Economics and Management Sciences, 2(2), 124-130. https://journals.co.za/doi/abs/10.10520/EJC133889
6 Widarjono, A., Shidiqie, J. & Elhasanah, L. (2021). The sensitivity of the Indonesian Islamic stock prices to macroeconomic variables: An asymmetric approach. The Journal of Asian Finance, Economics, and Business, 8(3), 181-190. https://doi.org/10.13106/jafeb.2021.vol8.no3.0181   DOI
7 Zahir, M., & Khanna, Y. (1982). Determinants of stock prices in India. The Chartered Accountant, 30(8), 521-523. https://doi.org/10.4236/tel.2016.64078
8 Barakat, A. (2014). The impact of financial structure, financial leverage, and profitability on industrial companies' shares value (applied study on a sample of Saudi industrial companies). Research Journal of Finance and Accounting, 5(1), 55-66. https://bsaan.com/wp-content/uploads/2014/11/The-Impact-of-Financial-Structure-Financial-Leverage.pdf
9 Sharpe, W. F. (1964). Capital asset prices: A theory of market equilibrium under conditions of risk. The Journal of Finance, 19(3), 425-442. https://doi.org/10.1111/j.1540-6261.1964.tb02865.x   DOI
10 Sha, T. L. (2017). Effects of price-earnings ratio, earnings per share, the book to market ratio, and gross domestic product on stock prices of property and real estate companies in Indonesia stock exchange. Journal of Economic & Management Perspectives, 11(1), 1743-1754.
11 Pradhan, R. S., & Dahal, S. (2016). Factors affecting the share price: Evidence from Nepalese commercial banks. SSRN Journal, 1(1), 56-111. https://ssrn.com/abstract_id=2793469
12 Gharaibeh, O. K., & Al-Qudah, A. M. (2020). Analysis of the determinants of risk factor model for the Jordanian banking stocks. The Journal of Asian Finance, Economics, and Business, 7(12), 615-626. https://doi.org/10.13106/jafeb.2020.vol7.no12.615   DOI
13 Gill, A., Biger, N., & Mathur, N. (2012). Determinants of equity share prices evidence from American Firms. International Research Journal of Finance and Economics, 17, 90.
14 Gujarati, D. N. (2003). Basic econometrics (4th ed.). Singapore: McGraw-Hill.
15 Hasan, N., Omer, A. J., Othman, B., Perot, K. A., Majid, A. A., & Kareem, F. (2019). Macroeconomic determinates of the stock price for industrial companies listed on the Istanbul stock exchange. International Journal of Psychosocial Rehabilitation, 23(2), 947-963. https://doi.org/10.37200/IJPR/V23I2/PR190342
16 Hausman, J. A. (1978). Specification tests in econometrics. Econometrica: Journal of the Econometric Society, 11(9), 1251-1271. https://doi.org/10.2307/1913827   DOI
17 Enow, S. T., & Brijlal, P. (2016). Determinants of share prices: The case of listed firms on Johannesburg stock exchange. The Journal of Accounting and Management, 6(1), 85-92. http://journals.univ-danubius.ro/index.php/jam/article/view/3181
18 Singh, D. (2018). Stock price determinants: Empirical evidence from Muscat securities market, Oman. In Hoffmann P. S. (Ed.), Firm value: Theory and empirical evidence (pp. 21-43). London, UK: IntechOpen http://doi.org/10.5772/intechopen.77343
19 Srinivasan, P. (2012). Determinants of equity share prices in India: A panel data approach. The Romanian Economic Journal, 46(6), 205-228. http://www.rejournal.eu/sites/rejournal.versatech.ro/files/articole/2014-06-27/2681/srinivasan.pdf
20 Simu, N., & Pangaribuan, A. M. (2020). Determinants of Indonesian share price: Do capital structure, sales growth, and profitability matter. International Journal Economics. Management Studies, 7, 174-181. https://dosen.perbanas.id/docs/wp-content/uploads/2020/02/11.-Jurnal-Artikel-IJEMS-Determinants-of-Indonesian-Share-Price.pdf
21 Perdana, M. K., & Adriana, C. H. (2018). Factors influencing the stock price of banking companies in the Indonesia stock exchange. Journal of Accounting and Strategic Finance, 1(1), 57-68. https://doi.org/10.33005/jasf.v1i01.26   DOI
22 Fama, E. F., & French, K. R. (2015). A five-factor asset pricing model. Journal of Financial Economics, 116(1), 1-22. https://doi.org/10.1016/j.jfineco.2014.10.010.   DOI
23 Gautam, R. (2017). Impact of firm-specific variables on stock price volatility and stock returns of Nepalese commercial banks. SAARJ Journal on Banking & Insurance Research, 6(6), 10-27. https://doi.org/10.5958/2319-1422.2017.00027.3   DOI
24 Lee, J. W., & Brahmasrene, T. (2020). An exploration of dynamic relationships between macroeconomic variables and stock prices in Korea revisited. The Journal of Asian Finance, Economics, and Business, 7(10), 23-34. https://doi.org/10.13106/jafeb.2020.vol7.no10.023   DOI
25 Almumani, M. A. (2014). Determinants of equity share prices of the listed banks in Amman Stock Exchange: Quantitative approach. International Journal of Business and Social Science, 5(1). http://www.ijbssnet.com/journals/Vol_5_No_1_January_2014/12.pdf