The Influence of Accounting Results on Share Prices of Companies Listed on the Ghana Stock Exchange

Abstract

The objective of this study is to examine the influence of accounting results on the share price of firms listed on Ghana Stock Exchange. Specifically, it is to investigate whether there are positive and significant correlations between earnings per share, dividend per share and price earnings ratio on one hand and share prices on the other hand in the context of the Ghanaian stock market. Publicly listed firms were selected from GSE on year to year basis for the analysis covering a period of ten years (i.e. 2006-2015). As a results, forty-one (41) different listed firms were selected covering the periods of 2006 to 2015. The study made use of unbalanced panel data to examine the correlation between earnings per share, dividend per share and price earnings ratio and share prices. The study used multiple regression model and regressed the share prices of the companies against selected variables (EPS, DPS, and P/E ratio) to determine the relationship or correlation between them. The results of the study indicate that earning per share and dividend per share have positive and statistically significant effect on the share prices of listed firms on the Ghanaian stock market. However, price earnings ratio was found to be positive correlation but not significant. This indicates that share prices are influenced by accounting results implying that, the annual financial statements issued by the firms listed on the Ghana Stock Exchange are used by the investing public to make investment decisions. It is hoped that, compliance with International Financial Reporting Standards by listed firms be emphasized by Ghana Stock Exchange as well as the Securities and Exchange Commission to ensure that published financial statements represent faithfully what they purport to represent.