Factors affecting stock price: Evidence from commercial banks in the developing market

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Abstract

This study aims to investigate the impact of microeconomic and macroeconomic factors on the market price per share using panel data from 13 listed Jordanian commercial banks during the period 2010–2021. Based on a microeconomic level the firm-specific variables are earnings per share (EPS), dividend per share (DPS), price-earnings ratio (PE), book value per share (BV), return on assets (ROA), and size (S). Similarly, gross domestic product (GDP), inflation (INF), and money supply (MS) were chosen as independent variables for the macroeconomics whereas the company’s dependent variable is market price per share (MPS). Earnings per share are the most internal and external factors affecting the share price (Arshad, Arshaad, Yousaf, & Jamil, 2015). This paper has investigated the influence of bank-specific and macroeconomic factors on the share price of Jordanian commercial banks using multiple regression models. Based on the regression results, the coefficient of EPS is positive at the 1% level of significance. implying that the greater the EPS, the higher the MPS. The same positive impacts for DPS, ROA, and S are considered major predictors of stock prices in Jordan. Volume was discovered to be the most important determining variable impacting stock price among the factors. This indicates that the bigger the company’s market capitalization, the higher the stock price. Major variables that impact the stock price include macroeconomic data such as GDP and MS.

Keywords: Market Price per Share, Earnings per Share, Divided per Share, Price-Earnings Ratio, Book Value per Share, Return on Assets, Size, Gross Domestic Product, Inflation, Money Supply

Authors’ individual contribution: Conceptualization — M.A.-D. and G.N.A.-E.; Methodology — M.A.-D. and G.N.A.-E.; Software — G.N.A.-E.; Validation — M.A.-D., G.N.A.-E., and W.A.; Formal Analysis — M.A.-D., G.N.A.-E., and W.A.; Investigation — M.A.-D., G.N.A.-E., and W.A.; Resources — M.A.-D. and G.N.A.-E.; Data Curation — M.A.-D. and G.N.A.-E.; Writing — Original Draft — M.A.-D., G.N.A.-E., and W.A.; Writing — Review & Editing — M.A.-D. and W.A.; Visualization — M.A.-D., G.N.A.-E., and W.A.; Supervision — M.A.-D.; Project Administration — M.A.-D.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G1, G2, G100, O16

Received: 30.06.2022
Accepted: 05.12.2022
Published online: 07.12.2022

How to cite this paper: Al-Dwiry, M., Al-Eitan, G. N., & Amira, W. (2022). Factors affecting stock price: Evidence from commercial banks in the developing market [Special issue]. Journal of Governance & Regulation, 11(4), 339–346. https://doi.org/10.22495/jgrv11i4siart14