Exploring the Determinants of Stock Prices in Macedonian Banks: The Role of Audit Opinion, ROA, and EPS

Bojan Malchev () and Zorica Bozhinovska Lazarevska ()
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Bojan Malchev: Ss. Cyril and Methodius University in Skopje
Zorica Bozhinovska Lazarevska: Ss. Cyril and Methodius University in Skopje

Chapter Chapter 4 in Financial Markets and Corporate Reporting under Geopolitical Risks, 2024, pp 61-78 from Springer

Abstract: Abstract This paper explores the influence of return on assets (ROA), earnings per share (EPS), and audit opinion (as control variable) on the stock prices of banks in North Macedonia. Using a linear multiple regression model, the study analyzes data from financial statements and annual reports of all 12 banks in the country over the 2012–2022 period. The findings reveal that audit opinion and EPS significantly affect bank stock prices. A positive audit opinion correlates with higher stock prices, as does an increase in EPS. Interestingly, excluding audit opinion from the analysis shows ROA’s significant impact on stock prices, indicating that audit opinion as a control variable modifies the ROA-stock price relationship. This suggests that investors highly regard audit opinion and EPS as indicators of a bank’s financial health, influencing their investment choices. Positive audit opinions and higher EPS are crucial for boosting stock prices, offering valuable insights for bank managers and investors. However, the study acknowledges limitations, such as the recent unimplemented changes in domestic audit practice, like the non-reporting of Key Audit Matters (KAM), which might have impacted the results differently. Additionally, the small sample size of only 12 banks limits the study’s generalizability. Future research is suggested to include a larger sample for better representativeness.

Keywords: Banks; Stock price; Audit opinion; ROA; EPS (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-031-62998-3_4

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DOI: 10.1007/978-3-031-62998-3_4

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