PRICE EARNINGS RATIO AND FINANCIAL PERFORMANCE NEXUS USING PANEL DATA REGRESSION MODEL: THE CASE OF OMAN

摘要

The market price of the equity tends to be adjusted over time due to various domestic and international economic reasons. Apart from macro-economic rationale, the market price of the equity in emerging and developed markets is determined based on the fundamental financial performance of the specific industry or company. In this direction, a simple panel data regression model (Fixed Effect Model & Random Effect Model) is used to capture the price dependence on various financial ratios such as net profit ratio, returns on equity and earnings per share. The model appropriateness has been tested using huasman test. The descriptive validity of the model is illustrated for a set of financial variables extracted from the financial statements of 36 listed companies in Muscat security market for the period of seven years (2008-2014). The findings conclude that there is a well-built dependence between price of the equity and the net profit ratio.