Impact of Firm Performance on Stock Returns: A Study of 30 Listed Firms in Bombay Stock Exchange

Abstract

The emerging area of research in financial industry is drawing a relation between the firms’ performance and its stock return. The outcome of all the research conducted over time has varying results. Over the years there are tremendous efforts to understand the link between financial performance of a company and its stock return. Despite the number of research attempts, it is still having low success rate, because of the unpredictability and volatility in the stock market. It is still an area to explore and study the possibility to accurately understand the stock returns by using the financial ratios. The present study is to investigate the financial ratios as an indicator of stock returns in context of Indian Companies. The study is based on 30 listed companies in BSE for a period of ten years and both financial and statistical techniques are applied for formulating a meaningful conclusion. The findings of this study clearly establish a positive correlation among the financial performance and the stock return.