Impact of Dividend Policy, Earning Per Share, Return on Equity and Profit after Taxes on Stock Exchange Prices: Islamic Banking Sector of Pakistan

Abstract

There are many key financial concerns to consider, including dividend policy, earnings per share, return on equity, and profit after tax. Studies on the elements that influence stock prices have been conducted numerous times. Earnings per share (EPS), return on equity (ROE), and profit after tax (PAT) were considered independent factors in this study, whereas stock prices were the dependent variables. This research was done to find out how these variables affected the banking industry. Between 2015 and 2019, annual reports from fifteen Islamic banks were analyzed to determine the impact of these variables. Islamic banks underwent a ratio analysis to discover both the positive and negative effects of the various variables that were present. Regression models have been used on the data panel. The result of this study indicates that out of four independent variables, two variables (dividend ratio and return on equity) have a negative and insignificant relationship, and the other two variables (earning per share and profit after taxes) have a positive and significant relationship. These relationships have been conducted based on ratio analysis with Islamic Banks. For future directions, researchers can take the private banking sector to find out the effect of these variables on each other. This study advocated the policy implications for investors and the government.