1

IMPACT OF ACCOUNTING INFORMATION ON SHARE PRICE

(An empirical evidence from KSE-30 index)
Muhammad Asif1*, Kashif Arif2
1. MS Scholar Mohammad Ali Jinnah University
2. Faculty of Business Administration, Mohammad Ali Jinnah University
* Corresponding author email: muhammad.aseeph@gmail.com
ABSTRACT
The purpose of this paper is to explore the relationship between accounting information and
share price. This research focuses on Karachi stock exchange which is the biggest stock market
in Pakistan. Accounting information (earning per share, book value per share, capital employed
per share and operating cash flow per share) how much influence on share price. Regression
Panel least square method is used to investigate the association between accounting information
(earning per share, book value per share, capital employed per share and operating cash flow per
share) and share price. It covers the period from 2006 to 2013. Political, economic condition,
speculator desire and accounting information's influence on share prices. In this research paper
cover only accounting information how much impact on share prices? The result show that Rsquare 59%. It is mean that accounting information has significantly impact on share price. This
research also endorses the literature review. Investors should recognize the relationship between
published accounting information and the stock market behavior. Mostly investors take their
investment decisions on the basis of the financial report. Except capital employed per share all
variables shown positive impact on share prices. Make sure stock market run independently with fair
accounting information. The study illustrated in this paper continues work on predicting share

price. Results show the accounting information earning per share, book value, capital employed
and net operating cash flow influence on KSE-30 index. Both the investors and the analysts
would find it helpful to understand the market speculation and market movement according to
the financial report.
Keywords Accounting Information, EPS, BV, CE, OCF, Pakistan

INTRODUCTION
Movement of share price is a puzzle for researchers. The scholars have developed different
types of models like(CAPM, Dividend discount, Financial ratios , Cash flow discount ) to help
investment decisions and understanding behavior of stock market but share price or market
behavior still remain unpredictable because there are too many vital forces that influence stock
market like economic performance, political environment, companies performance, technical ,
etc. In past available literature review empirically finds out that certain accounting factors
influence the route of share prices. In addition, this impact increase strongly with time. The
efficient markets hypothesis (EMH), generally recognized as the Random Walk Theory, is the
plan that existing stock value wholly responds as available information about the value of the
firm and there is no way to earn excess profits, (more than the market overall), by using this
information. It deals with one of the most fundamental and exciting issues in finance why
prices change in security markets and how those changes take place? It has very important
implications for investors as well as for financial managers. The first time the term "efficient
market" was used in a 1965 paper by E.F. Fama. Efficient market hypothesis (EMH) helps to
understand the type of market but its true market mechanism depends on environment . The
diversifying information and modernization in stock market and their different instruments create
more complexity . In this research paper I want to Investigate the relationship between financial
information and capital market. In this research main focus is on investor behavior of KSE in
Pakistan environment . Karachi stock exchange has achieved twice time (2002 &2014) best
performing stock exchange in the world. Karachi stock exchange is the second oldest stock
exchange in South Asia. Karachi stock exchange is very volatile market due to numerous vital
forces; national and international can influence on the stock price mechanism. Too many vital
forces can lead the share price, which are basically divided in to four categories such as
Economic, Fundamental, Technical, Political
factors influence. Financial information
(fundamental) is a part of investors, anticipation, market player and other internal factors. The
following few major factors which directly affect volatile and sensitiveness of Karachi Stock
Exchange are discussed in detail.

Political Influence

Accounting
Fundamental

Economic Condition
KSE

War against terrorist

Most investors can use usually accounting information because accounting information is an
unambiguous information which can help make a decision whether investors invest the

companys stock or not. Abnormal profit of companies affect particular share value but other
factors neutralizes it. Any capital market react according to the available information. It may be
financial , macroeconomic ,etc, some time abnormal growth in firm can produce result in shape
of abnormal stock return. Supply and demand, one of all factors impact on stock price. "The
primary objective of value relevance research is to investigate whether the financial statements
that companies produce to provide investors and other users both high-quality and valuable
accounting information that enables them to make informed decisions"(Mishari Alfaraih,2011)
Karachi stock exchange has of six types of Indices, 34 sector ,total listed companies 560 with
total listed capital Rs1,129,787.32 million and total market capitalization Rs6,056,506.03
million.
1.
2.
3.
4.
5.
6.

KSE-All Companies Index.

KSE-100 Index
KMI-30 Index
BK TI
OG TI
KSE-30 Index

(Karachi Stock Exchange All Companies Index)

(Karachi Stock Exchange 100 Companies Index)
(Karachi Meezan Islamic 30 Companies Index)
(Banking Tradable Index)
(Oil & Gas Tradable Index)
(Karachi Stock Exchange 30 Companies Index)

In this Research paper I have focused on KSE-30 Index. This index consists of 9 sector and 30
companies as show in table 2. In this research twenty seven company out of thirty companies are
elected, three companies dropped from KSE-30 Index due to unavailability required data.
According to efficient market hypothesis (EMH), KSE is type one market (weak market) because
less information is available for investors, and highly speculative market . Majority of investors
invest on the basis of financial annual or quarter based report. They use different accounting
parameter like price earnings ratio, book to price ratio , earning per share or historical share
price pattern . Changes in accounting information ought to prompt change in the share price, if
accounting data is helpful to illustrate the price. The question is whether there is a major
investment relationship between the B/P ratio, P/E ratio and other ratios etc. with the shares
valuation. So its necessary to systematically investigate the relationship between share price and
accounting figures in the long run. Information is drawn from Karachi Stock Exchange (30
index) and average share price of 27 companies from 2006 to 2013 .
Variables
Theories put forward that fluctuation of share value is associated with changes in accounting
fundamental variables which are relevant to share valuation like book value , earning per share ,
capital structure, earnings size of the firm and its growth. In this research I have the acquire
following variables.
Earnings Per Share

(EPS)

Book value per share

(BVPS)

Capital employed per share

(CEPS)

Net operational cash flow per share

(NOCFPS)

1. Earnings per share

Mostly scholars use earning per share to examine share price behavior . In literature review most
researchers associate EPS with stock price, used earning per share as an independent variable to
examine the relationship between accounting information and share value. Zhu (2003) research
found a significant positive correlation between share value and earnings per share. Michalis
Glezakos (2012) found the positive correlation with EPS and share price. Here, in this research,
are EPS positive and incremental change or vice versa, what and how much change in share
price.
EPS= Net profit / Outstanding Number of share
Another related accounting information strong tool is P/E ratio. Its a combination of share
price in the stock market and EPS known as P/E ratio. P/E ratio helps determine risk factors and
over/under valuation of share as on theory Low P/E particular scrip in industry or market much
potential to increase in the share price .
P/E = Market share Price / EPS
(1)
SP= Stock return, EPS = Earnings per share , e = error
2. Book value per share
Book value per share is another very strong accounting information tool. Book value is very
much helpful in the absence of share market value. The objective of this study is to observe
exactly the association between firm's share value in capital market and book value. The
combination of book value and market value has three situations to guide the risk factors. Book
value is greater than market value shows the lack of market confidence on future and company's
inability to produce profit and cash in future. However market value is greater than Book value than market show full confidence on company's earning power. Thus all profitable companies
will have market value greater than book value. Literature review shows that mostly researchers
conclude positive association with stock price, book value is considered as a real and true value
of share according to balance sheet.
Book Value = Total Equity / outstanding number of share
(2)
SP= Stock return, BVPS = Book value per share , e = error
3. Capital employed per share
This paper investigates the influence of stock price changes on their capital structures by KSE30 companies. Consequently, their debt-equity ratios vary closely with fluctuations in their own
stock prices. It also reflects the value of net assets (Total assets less current liabilities ) and
check association between capital employed per share and share prices. The use of capital
structure is considered as a one of the mechanisms to mitigate the agency costs and thereby
increase firm performance (Berger and Bonaccorsi di, 2006). Accordingly, a positive relationship

is expected between debt capital and firm performance. Capital Employed per share = Long
term liability +Equity /No. Outstanding share
(3)
4. Net operational cash flow per share
It is a realistic figure how much cash is generated from operational activities. This paper
investigates the impact of net operational cash flow on share value rather than accrual basis.
NOCF=Accrual base net profit +Non cash expenses+/- Current assets & Current Liabilities
(4)
Model

RESEARCH OBJECTIVE
only one factor is not responsible to affect share value. In this research paper I want to
investigate the relationship between accounting information and Karachi stock exchange 30
index behavior and check the degree of weighted on the accounting information and the rest of
the other forces and also the impact of such variables on stock prices. For this purpose I have
selected KSE-30 index. Find the cause of KSE volatility.

To evaluate the how much influence of accounting information on share price.

To identify the level of confidence on accounting information.
To identify the relationship between accounting information and share price.

RESEARCH QUESTION
This research finds out the relationship between published accounting information and stock
price movement of KSE-30 Index. Here the research question is how much accounting
information (Accounting figure and ratios) can influence stock market?
LITERATURE REVIEW
Numerous studies available on the accounting information show how much influence is these
on stock prices. Financial information is the best tool to evaluate the fluctuation of share price.
The changes in stock price correlate and associate with change in financial information. This
theory was developed by Ball and Brown in 1968. They established that if a listed company
booked surplus profit then investors could earn unusual return. That phenomena confirmed the
association with the companys profit and share price. The companys share price is an inclusive
indication of the companys future expected earnings. Further study done by Ball in 1995
observe equity market strength over fluctuation due to speculation .So knowledge in accounting
information is not sufficient in equity market. Other factors can also have impact on it. Ohlson

(1995) did numerous dynamic effort for setting up the evaluation model. His model is based on
future earning, dividend and book-value.
Yu and Huang (2005) examine that the financial data could influence shares value. They utilized
correlation regression analysis. It demonstrated the financial key which is significant correlation
with shares price and more suitable and precise decision-making tool for investors. From these,
various countries' scholars have had an outgoing research. Firstly, they have focused on the
relationship between financial and shares esteem; then, they have explored the association
between financial information and shares esteem, and how the financial information has an
impact on shares value.
Wang, Fu and Luo (2013) Relationship examined financial information and stock price. The
company's results of operations were based on the Shanghai Stock Exchange listed 60 companies
in 2011. The most significant accounting and related information, pricing, but a significant
positive relationship between the degree of change is the performance by the capital gains.
Ragab and Omran (2006) examined Egypt investors behavior over the period 1998-2002 .The
financial information, value significance, and equity market performance which shows how a
firm's market value is associated to both book-value and earnings per share. The conclusion in
this research model points out that profit of the listed companies is meaningfully related with
share price.
John R. M. Hand (2005) examined accounting and non accounting information influence on
share price in USA biotechnology firm for the period 1992-2003. Accounting information is less
relevant in venture capital market. Relevant information depend on maturity of the firm.
Hejazi, Jafari and Heidarpoor (2011) considered the stock exchange response of listed
companies financial profit data in Tehran stock exchange . This exploration inspected the
relationship between shares return and equity marker in the manufacturing concern companies in
the Tehran Stock Exchange from 2000 to 2004. Iranian equity investors mostly consider
operating profit in combination to the operating cash flow and net profit.
Peter Chen and Zhang (2005) : Their study showed that accounting information is influenced by
variation of share price . They used earning yield , capital investment, and change in profitability
and growth opportunity.
Christie Florou and Constantinos Chalevas(2010): investigated that accounting ratio and
information correlate with stock return, focused on Greece, period cover 2004-2006. This
research finds that the significant growth in operating activities( net profit ) of a company
positively affects
stock returns. The sample of 2,164 companies in this research has
concentrated on assessment of shares value.
Jose L. Gallizo & Manuel Salvador (2006) performed very comprehensive research to
investigate the relationship between share price and financial information. They follow the
accounting and share price data yearly base and refer to NYSE listed US companies on the over
the period 1992-2000. They obtained in term of progress in real cash flow and book-value with
the used of descriptive.

Glezakos, Mylonakis and Kafouros (2012) studied the influence of certain accounting
information on the path of shares price. They examined the relationship of profit per share and
book-value how much affects on shares value. The sample size is 38 listed companies in the
Athens Stock Market amid the 1996-2008 period. They concluded that the EPS and book-value
significantly influence on the share price. The investors of Athens are more focused on financial
data of companies.
Pathirawasam and Chandrapala (2013) investigate the relationship between book-value and
share-value. The research was done on the Colombo Stock Exchange (CSE) in the Sri Lanka
from 2005 to 2009. They applied pooled cross-sectional regression. The exploration uncover that
book-value is more value significant than the income in the Sri Lanka.
Adaramola and Atanda ( 2014) examined the relationship between accounting information and
the Nigerian stock market behavior. In this research sample size of the firms was 57 and covered
20 years from 1991 to 2010. The accounting information based on earnings, dividend, book
value and cash flows used as an independent variable to predict share prices of the firms. The
result of this research indicates that the accounting information has the capability to significantly
influence share prices of firms.
Mariarosaria Agostino , Drago and B. Silipo (2010). In this research scholars examined impact
of accounting standards on share prices. The researcher explored the relationship between the
market valuation of accounting information in the European banking industry. Applying panel
methods to a multiplicative interaction model, the outcomes propose that the book value of other
intangible assets of European listed firms is higher under IFRS than local GAAP.
Andreas Charitou, Colin Clubb and Andreas Andreou (2001) They examined incremental
information of earning and cash flow impact on stock prices. The result of this research is
earning and cash flow association with share price.
RESEARCH METHODOLOGY:
Accounting information has considerable association with the determination of share prices.
The study utilized simple ordinary least square linear regression and correlation. The essential
test involves regress the independent variable (earning per share, book value, capital structure
and net operating cash flow) against the dependent variables share value. I want to examine
association between these accounting variables and stock price during given period 2006 to
2013. According to the research prerequisite is average stock price and average stock price base
on end of the accounting period (daily market capitalization / daily total no. of shares trade) .
The following regression was adopted:
Model
Where
SP is average share price
is constant
1 is coefficient of earnings per share
2 is coefficient of book value per share
3 is coefficient of capital employed per share
4 is coefficient in net operating cash flow per share

(SP )
(EPS)
(BVPS)
(CEPS)
(NOCFPS)

e is error term
CONCEPTUAL FRAMEWORK
Independent variables

dependent variables

Dependent
EPS
Share price

Accounting Information
BVPS

of KSE-30
Financial Annual Report

CEPS
index

NOCFPS
companies

These four variables are extracted from the financial report (financial statements). Earnings Per
Share (EPS) and Net Operating Cash Flow Per Share (NOCFPS) are annual base figure. Earning
Per Share (EPS) accrual base figures are taken from Profit and Loss account (Income statement)
and Net Operating Cash Flow Per Share (NOCFPS) figures are taken from Cash flow statement.
This statement, nonaccrual base, shows that cash is generated from operational activities.
Remaining two variables Book Value Per Share and Capital Employed Per Share are
accumulated figures and these are related to the Statement of Financial Position (Balance Sheet).
Book Value Per Share shows the equity strength and faire value of share. Capital Employed
(long Term Liabilities + Total Equity ) or Total Net Assets .
DATA COLLECTION
SOURCES OF DATA

Data

Share prices

Sources

Karachi
Stock
Exchange

Accounting
Information

State Bank
Of Pakistan
(BSA)

Annual
Reports

Data are collected from two sources i) share price from Karachi stock exchange (KSE-30 index
companies) and ii) Accounting information taken from Balance Sheet Analysis (BSA) 2006 to
2011 from State bank of Pakistan publication and remaining two years 2012 and 2013 data taken
from annual reports of the company's web site, from 2006 to 2013, excluding three companies i)

Habib Bank Limited ii) Fatima Fertilizer Company Limited ii) Engro Foods Limited due to
availability of data (listed after 2006).
HYPOTHESES
In context of the research object and the research question develops the following hypothesis
regarding to check association between the Karachi stock exchange 30 index share price
mechanism with the accounting information.
H0: Accounting information has a significant impact on share price.
Ha: Accounting information has no significant impact on share price.
DESCRIPTIVE STATISTICS
Descriptive study for the sample is executed on the dependent variable (Market Price
per Share) and the independent variables (Earning per Share, Book value per share , Capital
employed per share ,Net operating cash flow per share ). The analysis examines the mean,
standard deviation and ranges of the data during the period 2006 to 2013.

SP

EPS

BV

CE

NOCF

Mean

115.2794

14.53880

71.73231

155.2091

20.12644

Median

72.38500

9.605000

55.63000

99.54000

12.55500

Maximum

548.4200

92.36000

377.9200

531.5300

321.6500

Minimum

2.350000

-67.39000

2.390000

10.33000

-135.3400

Std. Dev.

112.7820

18.50650

63.86317

136.2396

38.92728

216

216

216

216

216

Observations

The average share price of the KSE-30 index companies registered in Karachi Stock
Exchange is Rs. 115.28 The minimum share price is Rs. 2.35 and the maximum recorded
as Rs. 548.42, share price deviate from the mean is Rs. 112.78 and price range vary widespread
between 2.35 to 548.42. The average earning per share of the KSE-30 index is Rs. 14.54. The
minimum earning per share is Rs.-67.39 and the maximum recorded as Rs. 92.36, average
earning per share deviate from the mean is Rs. 18.51and average earning per share range from
-67.39 to 92.36 The average capital employed per share of the KSE-30 registered in Karachi
Stock Exchange is Rs. 155.21, minimum average capital employed per share Rs. 10.33 and the
maximum recorded as Rs. 531.53, average capital employed per share deviate from the mean is
Rs. 77.93 . The average net operating cash flow per share of the KSE-30 which are registered in
Karachi Stock Exchange is Rs. 20.16, minimum is Rs. -135.34 and the maximum recorded as
Rs. 321.65. deviate from the mean of average net operating cash flow per share is Rs. 38.91 and
range from -135.34 to 321.65.

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Independent variables yearly base average data

share
year
price
2006 123.25
2007 159.17
2008 130.41
2009
83.21
2010
89.19
2011
94.68
2012 100.00
2013 102.76

EPS
13.20
12.77
18.97
8.92
13.26
15.95
14.61
12.57

BVPS
53.02
62.19
69.99
66.39
67.40
78.52
84.61
65.35

CEPS OCFPS
136.39
13.64
139.79
25.39
145.97
4.91
150.61
15.40
152.48
19.15
163.08
21.73
174.23
18.51
179.12
32.47

KSE-30 index yearly base earning per share shows fluctuation between Rs 8.92 to Rs18.97. The
lowest EPS in 2009 and the highest EPS in 2008, but share price the highest in 2007. It is
conclude that 1st and 2nd quarter EPS helpful to predict share price. The highest P/E ratio in
2007and the lowest level in 2011 which attracted for investors. The average Book value of the
companies in 2006 is Rs 52.32 and the average capital employed of the companies in 2006 is
62.90 both independent variables gradually show increasing trend because these are
accumulated figures. Finally net operating cash flow shows fluctuation between 4.91 in 2008
and 25.51 in 2007 but NOCFPS linear shows upward trend. In KSE-30 index highly weighted
average is Oil sectors share is about 21.96%. This sector influence on dependent variable and
research results. Overall result show that upward trend in accounting variables.

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Correlation

SP
EPS
BV
CE
NOCF

SP
1.000000
0.738155
0.554557
0.464710
0.335838

EPS
0.738155
1.000000
0.594030
0.527969
0.291986

BV
0.554557
0.594030
1.000000
0.884186
0.145488

CE
0.464710
0.527969
0.884186
1.000000
0.109944

NOCF
0.335838
0.291986
0.145488
0.109944
1.000000

Above table show the correlation between variables. EPS 0.738 highly positive correlation, BV
0.555, CE 0.465 and NOCF 0.336 respectively positive associate with share price.
RESULT & INTERPRETATION
Table #1:

Regression Result

Constant

32.74
(8.40)

EPS

3.51
(0.35)

BVPS

0.42
(0.11)

CEPS

-0.03
(0.04)

NOCFPS

0.32
(0.15)
__________________________
R-squared
0.59
No. observation
216

Model 1

The study shown the meaningful role of EPS, BVPS and NOCFPS in determining the strength of
Share price. The results are satisfactory in terms of standard analytic tests. The value of R-square
is showing that about 58.72% of the total variation in dependent variable is explained by
independent variables excluding CEPS show no significant role to determination of share price .

12

There is no problem of autocorrelation in the model as shown by the value of D.W stats. The
overall performance of the model is satisfactory as shown by F-statistics.
From the above factual information it is clearly obvious that there is a relationship between the
change in share price as well as changes in accounting variables (EPS, BVPS, CEPS and
NOPCFPS).
Model 1

These independent variables results are significant impact on share prices expect CEPS. The
CEPS is a negative relationship with share prices in this model. EPS is highly influence on share
price. Its results show that investor too much focus on companies annual earnings.
Table #2:

Regression Result

without capital employed

Constant

30.47
(7.70)

EPS

3.55
(0.35)

BVPS

0.38
(0.10)

NOCFPS

0.28
(0.13)
__________________________
R-squared
0.59
No. observation
216

The results are almost same as model 1. All independent variables results are significant impact
on share prices
DISCUSSION
In any stock exchange the requirement is transparent trade mechanism that continues monitoring
system and information for all stakeholder . These elements create more opportunities for
investors and build confidence on stock exchange. This research is conducted on KSE-30
Index and this index consists of nine sectors and thirty companies covering eight years from
2006 to 2013. The results of this research show that accounting information significantly
influence on share prices. The environment of Karachi stock exchange gradually progresses
toward betterment especially Central Depository Company (CDC) electronic (paperless)
settlement of transactions and Karachi Automate Trading System (KATs) was introduced in
2002 computerized based transaction, but it's too much slow in term of introduce new

13

instruments for investment. In Pakistan have several different investment opportunities to invest
in i) property ii) Fixed deposit and saving scheme iii) Gold iv) foreign currency, etc. Due to the
high level of risk and lack of awareness and knowledge, the small investor hesitate to invest in
stock exchange. Yearly base performance show that in 2007 average stock price is the highest
level Rs159, while 2008 and 2009 shows fall to Rs89.19. However 2010 to 2013 shows
recovery cycle and revered Rs 102.76.The average EPS had same value. In 2008 hit the highest
level Rs18.97. In 2009 touched the lowest value Rs8.92 and recovery started in 2010 to 2012
and short fall in 2013. BVPS fluctuated between Rs53 to Rs84. 2013 figure was Rs 65.35 and
CEPS fluctuated between Rs136 to Rs174. 2013 figure was Rs114.89.The average NOCFPS
fluctuated between Rs4.91 to Rs32.47 .Oil and Gas sector average share price was Rs241.10.
EPS and NOCFPS were Rs30.69 , Rs24.08 respectively. BVPS was Rs131.63. Industry PE ratio
was 7.86 and P/B ratio 1.83. Banking sector average share price was Rs89.04. EPS and NOCFPS
were Rs9.06 , Rs41.8 respectively. BVPS was Rs54.19. Industry PE ratio was 9.8 and P/B ratio
1.64. Communication sector average share price was Rs26.05. EPS and NOCFPS were Rs 2.4 ,
Rs3.44 respectively. BVPS was Rs20.8. Industry PE ratio was 10.85 and P/B ratio 1.25.
Construction and Materials sector average share price was Rs44.55. EPS and NOCFPS were
Rs5.25 , Rs7.81 respectively. BVPS was Rs45.18. Industry PE ratio was 8.49 and P/B ratio .98.
Fertilizer sector average share price was Rs104.9. EPS and NOCFPS were Rs16.55 , Rs15.57
respectively. BVPS was Rs44.13. Industry PE ratio was 6.34 and P/B ratio 2.38. Electricity
sector average share price was Rs42.04. EPS and NOCFPS were Rs5.80 , Rs6.89 respectively.
BVPS was Rs25.93. Industry PE ratio was 7.24 and P/B ratio 1.68. Personal Goods (Textile)
sector average share price was Rs53.24. EPS and NOCFPS were Rs10.42 , Rs10.4 respectively.
BVPS was Rs93.57. Industry PE ratio was 5.10 and P/B ratio 0.6. Insurance sector average
share price was Rs136.44. EPS and NOCFPS were Rs12.61 , Rs.24 respectively. BVPS was
Rs72.12, industry PE ratio was 10.82 and P/B ratio 1.89.
CONCLUSION
The present study has been undertaken to assess the extent of association between accounting
variables ( EPS, BVPS, CEPS and NOCFPS) and market price of share. It is found there is
significant relationship between these variables . There is also a negative relationship between
CEPS and Share Price. From this study, it is proposed that financial specialists ought to have
essential learning of business and financial aspects. They ought to be all around educated when
settling on their investment decision. They ought not rely on upon the data from speculators or
other co investors who have the comparative enthusiasm on the indistinguishable marvel. Maybe
they ought to experience the reviewed yearly reports which give the reflect of the organization's
performance, financial position and changes in control of the owners.
this paper has clarified how bookkeeping data turns out to be a piece of the essential valuation
methodology utilized in the capital market and offers a more exhaustive hypothesis of the stock
evaluating system
(1)
the estimated coefficients of accounting variables except capital employed per share remaining
variables are positive regress . In this model I found that independent variable Earning per share

14

,book value ,Net operating cash flow significant influence on share price but capital employed
negative impact on share price. R-square 58.72%. without capital employed following model
(2)
EPS , BV and NOCF per share positively influence on share price and R square is 58.63%
My research and its results highly support literature review, and I conclude that "Accounting
information has a significant impact on share price".
RECOMMENDATION
Stock exchange is a barometer of any economy. According to this research Karachi stock
exchange should take step to attract small investors, to reduce risk factor and introduce
derivative product. Market run freely on own mechanism rather than manipulated market
direction by Government institution or members of Karachi stock exchange. According to
efficient market hypothesis (EMH) Karachi stock exchange lay on weak market where market
operate on past or historical pattern. Due to lack of information and education investor were
invest on past pattern basis.

Karachi stock exchange require to introduce customized derivative product for different
group of investors.
Take hard and concrete step against dirty speculation.
Efficient risk management
Make sure Karachi stock exchange set direction without outside influence .
Stock exchange system element any type of cartel.
Conduct different courses for self portfolio management.
Introduce sector wise Index

FUTURE RESEARCH
There are certain areas that require further research in the Pakistan stock exchange. To be more
in-depth analysis of ongoing research in this field should focus on Karachi Stock Exchange
bench mark KSE-100 index quarter base data. In future research incorporate index volatility.
Another aspect of future research is technical analysis of KSE-100 index. Future research
should be based on Efficient Market Hypothesis (EMH) in the light of Pakistani environment.
Efficiency Risk Management role in Karachi stock exchange. Comparative analysis of
performance of Karachi stock exchange with regional countries stock exchange. Future of
derivative products of future option market in Karachi stock exchange .The analysis of
Pakistani people investment culture where investors invest in real estate property , Gold and
Banking rather than stock exchange. Customized indices help investors to take better decision.
Return base comparative analysis KSE with real estate property , Gold and Banking sector
returns should be considered.

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Table 1 Kse30 index Sector wise

i

1
2
3
4
5
6
7
ii

8
iii

9
10
11
12
13
14
15
iv

16
17
18
19
v

20
21
22
23

Oil and Gas(7 companies)

Symbol
Year
Company Name
End
OGDC
June
Oil and Gas Development Company
Limited
PPL
June
Pakistan Petroleum Limited
PSO
June
Pakistan State Oil Company Limited
POL
June
Pakistan Oilfields Limited
MARI
June
Mari Petroleum Company Limited
ATRL
June
Attock Refinery Limited
APL
June
Attock Petroleum Limited
Fixed Line Telecommunication(1 company)
Symbol
Year
Company Name
End
PTC
Dec
Pakistan
Telecommunication
Company Limited
Commercial Banks(7 companies)
Symbol
Year
Company Name
End
NBP
Dec
National Bank Of Pakistan
BOP
Dec
Bank Of Punjab Limited
HBL
Dec
Habib Bank Limited
BAFL
Dec
Bank Al-Falah Limited
UBL
Dec
United Bank Limited
MCB
Dec
MCB Bank Limited
BAHL
Dec
Bank Al-Habib Limited
Chemicals(4 companies)
Symbol
Year
End
FATIMA
FFC
Dec
FFBL
Dec
ENGRO
Dec

Company Name
Fatima Fertilizer Company Limited
Fauji Fertilizer Company Limited
Fauji Fertilizer Bin Qasim Limited
Engro Corporation Limited

Construction and Materials (Cement)(5 companies)

Symbol
Year
Company Name
End
FCCL
June
Fauji Cement Company Limited
MLCF
June
Maple Leaf Cement Factory Limited
DGKC
June
D.G. Khan Cement Company Limited
LUCK
June
Lucky Cement Limited

Outstanding Shares
4,300,928,400
1,971,715,615
271,685,938
236,545,920
91,875,000
85,293,000
82,944,000
Outstanding Shares
3,774,000,000

Outstanding
Shares
2,127,512,862
1,555,113,165
1,466,852,508
1,349,156,250
1,224,179,688
1,113,030,752
1,111,425,419

Outstanding
Shares
2,100,000,000
1,272,238,147
934,110,000
511,269,370

Outstanding Shares
1,331,115,839
527,733,926
438,119,097
323,375,000

16

23
vi

25
26
vii

27
viii

28
29
ix

30

KOHC
June
Electricity(2 companies)
Symbol
Year
End
HUBC
June
KAPCO
June

Kohat Cement Limited

Company Name

154,508,688
Outstanding Shares

The Hub Power Company Limited

KOT ADDU POWER COMPANY
LIMITED
Food Producers(1 company)
Symbol
Year
Company Name
End
EFOODS
Engro Foods Limited
Personal Goods (Textile)(2 companies)
Symbol
Year
Company Name
End
NML
June
Nishat Mills Limited
NCL
June
Nishat Chunian Limited
Non Life Insurance(1 company)
Symbol
Company Name
AICL

Dec

Adamjee Insurance Company Limited

1,157,154,400
880,253,228

Outstanding
Shares
766,596,075
Outstanding
Shares
351,599,848
200,184,631

Outstanding
Shares
350,000,000

Table 2
Sectors
Oil and Gas
Fixed Line Telecommunication
Commercial Banks
Chemicals
Construction and Materials
Electricity
Food Producers
Personal Goods (Textile)
Non Life Insurance
Total

Outstanding Shares
7,040,987,873
(7 companies)
(1 company)
3,774,000,000
9,947,270,644
(7 companies)
4,817,617,517
(4 companies)
(5 companies)
2,774,852,550
2,037,407,628
(2 companies)
(1 company)
766,596,075
551,784,479
(2 companies)
(1 company)
350,000,000
32,060,516,766

21.96%
11.77%
31.03%
15.03%
8.66%
6.35%
2.39%
1.72%
1.09%
100%

17

5 Years Progress Report

In million except companies, index and bonds data
5 YEARS PROGRESS 2010-2014
Upto
Upto
Upto
31-12-2010 30-12-2011 31-12-2012

Upto
31-12-2013

Upto
20-06-2014

Total No. of Listed

644
638
573
560
557
Companies
919,161.26 1,048,443.87 1,094,367.40 1,129,787.32 1,159,866.69
Total Listed Capital - Rs.
Total
Market
3,268,948.59 2,945,784.51 4,242,278.04 6,056,506.03 6,785,210.62
Capitalisation - Rs.
KSE-100TM Index
12022.46
11347.66
16905.33
25261.14
28691.84
TM
KSE-30 Index
11588.24
10179.03
13764.00
18808.86
19705.78
KSE All Share Index
8359.31
7856.82
11964.24
18664.04
21231.62
New Companies Listed
6
4
4
3
3
during the year
Listed Capital of New
33,438.45
16,010.82
8,161.03
4,545.07
14,890.66
Companies - Rs.
New Debt Instruments
4
6
5
6
3
Listed during the year
Listed Capital of New
5,650.18
14,754.80
5,254.67
9,779.42
6,000.00
Debt Instruments - Rs.
Average Daily Turnover 132.64
96.91
196.68
238.62
251.99
Shares in million
Average value of daily
4,405.20
3,506.22
4,675.47
7,603.54
9,501.05
turnover - Rs.
Average Daily Turnover
4.58
5.78
12.94
22.29
25.50
(FutureTM) YTD
Average Value of Daily
396.90
611.92
862.71
1,868.74
2,398.16
Turnover - YTD
Foreign Investment in Securities Market
Inflow - Rs
Outflow - Rs
Net Inflow/(Outflow) - Rs
www.kse.com.pk/

18

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