The Impact of Financial Ratios on Stock Price Performance: A Quantitative Study of Listed Companies in India
Keywords:
Financial Ratios, Return on Equity (ROE), Current Ratio (CR), Debt-to-Equity, Ratio (D/E), Stock Price PerformanceAbstract
This study examines the impact of key financial ratios—Return on Equity (ROE), Current Ratio (CR), and Debt-to-Equity Ratio (D/E)—on the stock price performance of companies listed on the National Stock Exchange (NSE) of India. Using a sample of 100 firms from the fiscal year 2022–2023, the research applies correlation and multiple regression analyses to assess the influence of these ratios on stock returns. Results reveal that ROE has a strong and positive relationship with stock returns, highlighting profitability as a crucial driver of market performance. The Current Ratio demonstrates a weak but positive association, suggesting liquidity plays a moderate role in investor confidence. Conversely, the Debt-to-Equity Ratio exhibits a negative yet statistically insignificant impact on stock returns, indicating leverage's effect may vary depending on firm or market conditions. These findings provide valuable insights for investors, financial analysts, and policymakers by emphasizing the importance of profitability and liquidity in shaping stock market outcomes in emerging economies like India. The study contributes to understanding how financial fundamentals influence equity valuation, supporting more informed investment decisions and policy formulation.
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Copyright (c) 2024 Karma Wangchuk
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