Impact of Accounting Information on Share Price: Empirical Evidence from Pakistan Stock Exchange

Abstract

Purpose—The purpose of this paper is to examine the relationship between accounting information and share price. In order to achieve this, a model that includes specific accounting ratios (earning per share, book value per share, capital employed per share and operating cash flow per share) and shares a price is developed.

Design/methodology/approach—The data were collected from the companies listed in KSE-30 index. The time frame spans from 2006 to 2013 and OLS regression models were used to examine the relationships

Findings—The resulting evidence suggest that accounting information parameters have significant influence on share price and they have joint explanatory power in determining stock prices. This research finds the consistent results with pervious empirical researches.

Originality/value—The present study adds to the existing literature by examining the impact of accounting information on share prices within the context of an emerging capital market such as Pakistan Stock Exchange using KSE-30 companies. This is believed to be the first study which considers the aforementioned issues in the Pakistan’s capital market environment.