The Influence of Sustainable Earnings on Stock Price: Evidence from Publicly Listed Vietnamese Business Enterprises

Nung Hong Do () and Nha Van Tue Pham
Additional contact information
Nung Hong Do: National Economics University, 207 Giai Phong Road, Hai Ba Trung District, 100000 Hanoi, Vietnam
Nha Van Tue Pham: National Economics University, 207 Giai Phong Road, Hai Ba Trung District, 100000 Hanoi, Vietnam

Asian Academy of Management Journal of Accounting and Finance (AAMJAF), 2020, vol. 16, issue 2, 101-121

Abstract: Expected earnings and stock price are important determinants of investors’ decision. This research is conducted to estimate earnings persistence and examine the relationship between sustainable earnings on price-to-earning (P/E) ratio based on financial statements’ information of 631 publicly listed non-financial companies on Vietnam’s stock market, by using Ordinary Least Squares (OLS) and Logit function. The results show that earnings persistence depends on net operating assets growth, profit margin changes, operating asset turnover changes and past profitability. Besides, both the sustainable and unsustainable components of earnings growth are proved to empirically affect P/E ratio, even though investors underreact to sustainable earnings and overreact to unsustainable earnings. This study helps to improve investors’ perception of their future earnings, investment value and companies’ sustainable growth, particularly in the context of developing stock market of Vietnam which is full of market anomalies.

Keywords: earnings persistence; earnings per share; market price; P/E; returns on net operating assets (RNOA) (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://web.usm.my/journal/aamjaf/aamjaf16022020/aamjaf16022020_5.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:usm:journl:aamjaf01602_101-121

Access Statistics for this article

More articles in Asian Academy of Management Journal of Accounting and Finance (AAMJAF) from Penerbit Universiti Sains Malaysia Contact information at EDIRC.
Bibliographic data for series maintained by Journal Division, Penerbit Universiti Sains Malaysia ().