Determinants of Share Price: A Case of Automobile Industry in Malaysia

Abstract

This research investigates the determinants of share price in the Malaysian automobile industry by using financial ratios such as book value per share, earnings per share, price-earnings ratio and return on equity within the time span of year 2001 to 2015 using the quarterly data sourced from Wall Street Journal and sample companies’ quarterly reports. Augmented Dickey-Fuller and Phillips-Perron unit root test are used to test the stationarity of data and the variables are found to be stationary at first difference. Data were analyzed with regression models to reveal the linkage between the explanatory variables and share price. Results revealed that the EPS and P/E ratio are significantly and positively correlated to share price. Book value per share is also positively correlated to the share price but the strength of the relationship is unidentified. However, the relationship of return on equity and share price is undecided due to contradicting results.