Investigating The Relationship Between Financial Factors And P/E Ratio Of Listed Steel Companies On Vietnam Stock Exchange

Quan Nguyen Van; My Bui Do Huyen; Binh Bui Doan Gia

doi:10.18535/ijsrm/v12i06.em13

Abstract

The importance of the steel industry and its continuous development for steel companies in developing countries may lead to potential investment opportunities for investors in the stock markets. With the direct impact of financial indicators, this study was conducted with the main purpose to investigate the relationship between financial factors and price-to-earnings (P/E) ratio of listed steel companies on Vietnam Stock Exchange. The research was conducted with quantitative method through collecting secondary data with 13 listed businesses in the period of 2013-2022. The findings indicated that dividend payout ratio, earnings growth and stock price respectively have a decreasing positive impact on P/E ratio. In contrast, earnings per share shows a non statistical relationship with P/E. This will be an important basis for proposing management and policy implications for policy makers, businesses and investors to promote favorable a stock investing environment through a wise assessment of P/E ratio.

Keywords

Dividend payout ratiofinancial factorslisted steel companiesprice to earnings ratio

References

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[refR-2] Asad, I.A.A., Nour, A., & Atout, S. (2023). The Impact of Financial Performance on Firm’s Value During Covid-19 Pandemic for Companies Listed in the Palestine Exchange (2019–2020). In: Musleh Al-Sartawi, A.M.A., Razzaque, A., Kamal, M.M. (eds) From the Internet of Things to the Internet of Ideas: The Role of Artificial Intelligence, EAMMIS 2022, Lecture Notes in Networks and Systems, 557. Springer, Cham.Google Scholar ↗

[refR-3] Azam, M. (2010). Factors influencing the price-earnings multiples and stock values in the Karachi stock exchange. Interdisciplinary Journal of Contemporary Research in Business, 2(5), 105-139.Google Scholar ↗

[refR-4] Cam, N. (2023). Outlook for the global and Vietnam steel market in 2023. Available at: https://mrssteel.com.vn/blogs/steel-news/what-is-the-outlook-for-the-global-and-vietnam-steel-market-in-the-fir. (Accessed: 23 February 2024).Google Scholar ↗

[refR-5] Dutta, K.D., Saha, M., & Das, D.C. (2018). Determinants of P/E ratio: An empirical study on listed manufacturing companies in DSE. International Journal of Scientific and Research Publications, 8(4).Google Scholar ↗

[refR-6] Emudainohwo, O.B. (2017). Determinants of price-earnings ratio: Nigerian experience (quantile regression). International Journal of Economics, Business and Management Research, 1(5), 46–76.Google Scholar ↗

[refR-7] Freihat, A.R.F. (2019). Factors affecting price to earnings ratio (P/E): Evidence from the emerging market. Risk Governance and Control: Financial Markets and Institutions, 9(2), 47–56.Google Scholar ↗

[refR-8] Gacus, R.B., & Hinlo, J. (2018). The reliability of constant growth dividend discount model (DDM) in valuation of Philippine common stocks. International Journal of Economics & Management Sciences, 7(1), 2-9.Google Scholar ↗

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[refR-11] Gordon, M.J. (1962). The investment, financing, and valuation of the corporation. RD Irwin.Google Scholar ↗

[refR-12] Gottwald. R. (2012). The use of the P/E ratio to stock valuation. GRANT Journal, 21-24.Google Scholar ↗

[refR-13] Graham, B., & Dodd, D.L. (1934). Security analysis: Principles and technique. McGraw-Hill.Google Scholar ↗

[refR-14] Ho, T.H., Pham, T.T.H, Nguyen, T.T., & Nguyen, Q.N. (2023). Factors affecting financial risks: Evidence from steel enterprises listed on Vietnam’s stock market. International Journal of Advanced and Applied Sciences, 10(3), 75–81.Google Scholar ↗

[refR-15] Jeon, K. (2019). Vietnam’s Steel Industry: Characteristics And Steel Demand Forecast. POSCO Research Institute. Available at: https://posri.re.kr/files/file_pdf/82/16022/82_16022_file_pdf_1567402545.pdf (Accessed: 22 November 2023).Google Scholar ↗

[refR-16] Kecheng, S. (2022). Research on the Influencing Factors of the P/E Ratio of Listed Companies. 2022 International Conference on Education, Management, Business and Economics.Google Scholar ↗

[refR-17] Krishnan, C.N., & Chen, Y. (2017). The relationship between dividend payout and price to earnings. SSRN Electronic Journal.Google Scholar ↗

[refR-18] Nagendra, M., & Muruganandam, S. (2012). Intrinsic value: a tool for selection of the stocks. Seventh International Seminar on Financial Markets: Issues and Challenges (FIM IC - 2012), January 2012 conducted by Bharatidasan University, Tiruchirappalli. Tamilnadu, India. Available at SSRN: https://ssrn.com/abstract=3167150.Google Scholar ↗

[refR-19] Nayaata, P. (2009). The relationship between capital structure, earnings growth and price earnings ratio of firms listed at the NSE. The Requirements for the Degree of Master of Business Administration, School of Business, University of Nairobi.Google Scholar ↗

[refR-20] Nicolson, S.F. (1960). Price-Earnings Ratios. Financial Analysts Journal, 16(4), 43-45.Google Scholar ↗

[refR-21] Penman, S.H. (1996). The articulation of price–earnings ratios and market-to-book ratios and the evaluation of growth (digest summary). Journal of Accounting Research, 34(2), 235-259.Google Scholar ↗

[refR-22] Premkanth P. (2013). Determinant of price earning multiple in Sri Lanka listed companies. European Journal of Business and Innovation Research, 1(2), 44–56.Google Scholar ↗

[refR-23] Rahman, M.L., & Shamsuddin, A. (2019). Investor sentiment and the price-earnings ratio in the G7 stock markets. Pacific-Basin Finance Journal, 55, 46–62.Google Scholar ↗

[refR-24] Sajeetha, A.M., Nusaika, M.F., & Safana, M.N. (2023). An empirical study on determinants of price earnings ratio: Evidence from listed food, beverage and tobacco companies in Colombo Stock Exchange. Asian Journal of Economics, Business and Accounting, 23(10), 32–43.Google Scholar ↗

[refR-25] Saji, T.G., Kasim, M., & Harikumar, S. (2021). Price Earnings ratio as a tool in investment decision making A statistical analysis in the facet of Global financial crisis. Acumen, 2, 24-33.Google Scholar ↗

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[refR-29] Zhang, H. (2022). An Empirical Analysis of the Determinants of the P/E Ratio A Case Study of China’s Media Industry. Journal of Family Business and Management Studies, 14(2), 37–58.Google Scholar ↗