Academy of Entrepreneurship Journal (Print ISSN: 1087-9595; Online ISSN: 1528-2686)


Financial Ratios and Company Stock Performance: An Empirical Study of Public Companies Listed on Shanghai Stock Exchange (SSE)

Author(s): GholamReza Zandi, Imran Ahmed Shahzad and Vigneswari Lokanathan

The stock market as an emerging economy has become increasingly popular in recent years because of its attraction for investors willing to make money efficiently. In order to provide an encouragement to investors, financial ratio analyses have been widely used in business literature based on its assistance for stakeholders’risks control and information to make profits. Therefore, this article aimed at studying the relationship between financial ratios and the performance of the companies’ shares. This study collected data from financial statements of public companies listed on the Shanghai Stock Exchange (SSE) and applied SPSS version 26 for analysis and to analyze the relationship patterns. The three typical financial ratios of activity, debt and liquidity were selected and concluded the average payback period had significant positive impact on the performance of the company's shares. Control over current ratio is of great importance for the development of the company so a high liquidity ratio could be used to minimize risks. Full utilization of the available resources and assets by firms can develop in stock markets as this utilization is found as highly significant for the future development of the firms. Further to this, financial expert must consider debt ratio, as it contributes towards future growth as this ratio highlight the relationship between total assets of the firms and total liabilities. Therefore, it can provide guidance to firm’s financial controller as well as the investors. Additionally, debt ratio gives the exact idea about the firms, operational capabilities and capital structures where balance is required while both lower and upper ratios are not found as good indicator for the firms’ development and growth.

Get the App