Determinants of changes in share prices in banking sector of Pakistan

Abstract

Purpose – Over the past many years ago, lot of work has been completed by the researchers trying to understand the relationship between different factors and stock exchange prices. The author has tried to explain different factors that affect share prices. The purpose of this paper is to know about the impact of size, dividend, profitability, asset growth of 15 Pakistani banks on share price on the basis of previous behavior of all the variables with each other. Design/methodology/approach – A sample of 15 banks has been selected from Karachi stock exchange for the period of 2008-2011, Arch-Garch and unit root cannot be applied to check the stationarity and volatility due to small sample size. The analysis utilized fixed effect regression model, the test includes regressing the dependent variable SP (share price) and independent variables size, DY (dividend yield), ROA (return on asset), and AG (asset growth). Findings – Results show that “size” has a positive significant relationship with the share price while the other variables have insignificant relationship. Originality/value – This paper helps in determination of the factors that affect share price fluctuations in banking sector of Pakistan. The similar affects can be observed in financial sector in other countries.

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