The determinants of the price-earnings ratio in the Norwegian aquaculture industry

摘要

This research aims to fill the gap in the existing literature on valuation of aquaculture firms by investigating factors explaining their relative valuations. Employing a random effects model, we show that return on equity is an important determinant of price-earnings ratios, and is negatively related to the ratio. The cyclical pattern of profitability in the industry can serve as an explanation as higher profitability today indicates lower future profitability, which results in lower price-earnings ratios. Consistent with dividend-signaling theory, payout ratio is positively related to price-earnings in the industry. Expected returns, currency fluctuations, and changes in salmon price, do not appear to have any effect on the price-earnings ratio.