THE ROLE OF FINANCIAL ATTRIBUTES OF PROFITABLE FIRMS ON STOCK PERFORMANCE IN PAKISTAN

Abstract

The study in hand endeavored to determine how financial characteristics of profitable firms directly affect their share prices on the stock market. For this purpose, we have used data from 2000 to 2018 and want to know, whether these financial attributes, i.e., ROE, ROA, P/E ratio, PM, size, and leverage, are directly involved with the stock prices of the profitable firms. However, the panel data approach was utilized to analyze the data. The results categorically showed that a firm's financial attributes have a linear relationship with its stock returns on stock market. This result also indicated that the equity holders of those firms of market investors follow direction of equity prices for future return because, as the price equity of the profitable firms increases, they invest more for high discounting’s in market because of the linear relationship between firms financial attributes and their stock prices. more over this results also explained that the efficiency of PSX can be improved by by improving financial knowledge of market arbitrageurs. The results provide signifncant information in reaching the decision as well as recommending some suggestions to stakeholders, policy-makers along with future researchers to revisit their decisions regarding ctock performance in Pakistan.