A Study on Impact of Firms’ Performance on Stock Returns -Evidence from NSE

Abstract

This paper investigates the impact of firms performance on stock return, the data is taken from the pharmaceutical firms listed on the nifty50 Index, National stock exchange, over the period 2006 to 2016. To examine the five independent variables are taken to measure firms’ performance on the one dependent variable that is stock return. The firms’ performance can be depicted through the five independent variables which are Earning per Share, Net Profit Margin, Return on Assets, Return on Equity and Quick Ratio. The method used to analyze the relationship between independent variables and dependent variable is regression analysis and correlation.

The findings of the study identified are that ROA and EPS have direct impact on stock return whereas NPM has no significant impact on stock return. When EPS increases growth will be seen in stock returns of the stocks whereas when NPM increases, investors looking for short-term gain and in want od dividend will sell of their stock which will cause the stock returns of the company to decrease in coming future for the

reason of excess supply of that stock in the market, taking the other variables into consideration that is ROE and QR which shows no significant impact on the stock return.