Explanatory Power of Accounting Variables in Determining Share Price: The Case of Cement Industry of Pakistan

Abstract

This paper studies the impact of various variables on the share price of the cement sector companies in Pakistan. The financial performance of 6 out of 18 firms has been examined over a ten year period, taking changes in equity, net income, net sales, dividends and financial leverage as dependent variables and share price of the company as the independent variable. Relationship of each variable with the share price has been analyzed through ordinary least square method using eviews statistical application. After conducting the analysis on the different variables it can be concluded that dividends, net profit and net sales of Attock Cement, Financial leverage of Cherat Cement and net profit and book value of Kohat Cement are significantly effecting the share price of the stocks, whereas other variables have negligible impact on the firm’s share price.

Keywords: Share Price, Accounting Variables, Pakistan Cement Industry