The effect of profit per share, Tobin's Q and financial leverage on the stock price of companies listed on the Tehran Stock Exchange

Thesis for M.A

Business-Financial Management

Abstract:

The main research issue in this research is whether there is a significant relationship between earnings per share, Tobin's Q ratio and financial leverage with the stock prices of companies listed on the Tehran Stock Exchange? In order to find an appropriate answer to the main research question, four hypotheses have been formulated. The statistical population of the research includes all companies admitted to the Tehran Stock Exchange. The sampling method in this research is systematic. In this research, the collected data related to the variables were analyzed using statistical and econometric techniques, and the hypotheses were also tested. The results of the research hypotheses test show that among the independent variables, financial leverage and Tobin's Q have a significant relationship with the stock price. According to the test results, it can be seen that all the sub-hypotheses are also confirmed. 1-1- Introduction

It means an organized and formal capital market, in which the purchase and sale of company shares or bonds are carried out under certain rules and laws, and on the one hand, it is central to collect savings and liquidity of the private sector in order to finance long-term investment projects and investment in companies. Therefore, attracting people's participation requires knowing the amount of return expected by shareholders and the level of risk tolerance of investors according to the amount of capital and behavioral characteristics of different people (Hamidian, 2019).

Given that the most important goal of the investor from investing is to get future benefits, so he tries to invest in the best opportunity and get the highest return according to the risk. This issue has caused many financial researches to be directed towards the prediction of stock prices or returns in different markets (Ala, 2004). Financial ratios provide useful financial information to investors and analysts, so that they can evaluate a company's performance and analyze its position in a sector over time (Galizo and Salvador, 2003). The chapter, while presenting the statement of the problem, the issues related to the research objectives, the theoretical framework of the research, the research methodology, the scope of the research and the definitions of the terms and words used in the research are also described. It is capital. Especially the capital market, which is the medium and long-term supplier of funds needed by economic units. Due to the increasing importance and expansion of capital markets in equipping and collecting small individual funds towards production activities, identifying the behavior of investors and the variables affecting stock prices in these markets has become very important (Moradi, 2015).

Some people believe that the main goal of joint stock companies should be to maximize social welfare. Although this goal is very high, but it is not practically possible, and for this reason, a group of people believe that the goal of stock companies should be to maximize the stock price. On the other hand, the stock price is one of the items that people tend to predict, because the stock price is of interest to internal users (such as financial managers and executive directors) and external users (such as creditors and investors) (Ebrahimi and Saidi, 2019).

The basis of any investment is its correct and accurate evaluation. In the stock market, share evaluation is also of the same importance. Lack of correct and accurate evaluation makes investors face a lot of risks and dangers, and if they invest without accurate evaluation, by accepting a very high risk, they may never get a return commensurate with accepting this risk. Knowing the factors affecting stock price changes helps to make transactions more correctly. Previous researches have examined some of the factors affecting stock price changes and none of the studies have simultaneously carried out the effect of the variables of profit per share, financial leverage, Tobin's Q with the stock price in two cases of total industries and different industries through the regression model of multiple variables..

In this research, we will examine the relationship between the main variables of the research (earnings per share, financial leverage, Tobin's Q) with the stock price and we will determine how much these factors can explain the changes in stock prices in the Tehran Stock Exchange.

1-3- Importance and necessity of the research

The objectives of the research actually express a summary of what should be achieved by conducting the research. The purpose of the research is actually to respond to a need, a need that has been created in connection with the research question (Kholatbari, 2017).

If it is possible to predict the changes in stock prices by examining the impact of profit per share, Qotubin and financial leverage, it is possible to get more returns by reducing risk, and as a result, the benefits that investors get will be manifested in the form of dividends paid, stock price increases, or both.

1-4- The purpose of the research

Fluctuation of stock prices is a normal and everyday thing in all stock exchanges. The stock price is influenced by various factors, both internal and external, and fluctuates and changes with each of them. The purpose of this research is to examine the effects of earnings per share, Q-Tobin and financial leverage on stock prices in the Tehran Stock Exchange.

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1-5- Research question

Every research actually begins with the intention of answering and finding a solution for a main problem that has emerged in the form of a question. In order to maintain its coherence, purposefulness and applicability, every research should be organized on the solution of a main problem (Khaki, 2009).

The main research problem in this research is whether there is a significant relationship between profit per share, Tobin's Q ratio and financial leverage and the stock price of companies listed on the Tehran Stock Exchange?

1-6- Research hypotheses

A hypothesis is a reasonable guess based on which the researcher suggests possible solutions to the problem and especially predicts the relationship between the existing variables.(Kholatbari, 2017)

In order to find a suitable answer to the main question of the research, three hypotheses have been formulated:

Hypothesis 1: Between the profit per share and the market value of the companies' shares Accepted in Tehran Stock Exchange, there is a significant relationship.

Hypothesis 2: There is a significant relationship between financial leverage and stock market value of companies accepted in Tehran Stock Exchange.

Hypothesis 3:. There is a significant relationship between the company's investment opportunities and the market value of the shares of the companies listed on the Tehran Stock Exchange. Hypothesis 4: There is a significant difference between the profit per share, financial leverage and Q-Tobin ratio in different industries. Sub-hypothesis 4-1- There is a significant difference between the profit per share in different industries. Finance exists in different industries. Sub-hypothesis 4-3- There is a significant difference between the Q-Tobin ratio in different industries. 1-7- Research implementation method 1-7-1- Research method and data collection The scope of this research is in three thematic, temporal and spatial domains, which are: Thematic domain: The present research in terms of It is a subject in the field of financial management and examines the relationship between profit per share, financial leverage, and Tobin's Q with the stock price of companies listed on the Tehran Stock Exchange.

Time domain: The data of this research includes from the beginning of 1386 to the end of 1390.

The spatial domain is: the country's capital market - specifically the Tehran Stock Exchange.

Required data and information It has been extracted, compiled and classified from numerous sources in the following ways and has been used in the relevant sections: a) library resources b) information and trading system of the stock exchange c) statistical and econometric software 1-7-2- statistical population and research sample It includes companies admitted to the Tehran Stock Exchange. The sampling method in this research is systematic elimination.

The number of samples calculated for the first to third hypotheses of the research is 93 companies for each fiscal year. Also, due to the existence of the fourth condition for the fourth main hypothesis, the three industries of automobile parts, pharmaceuticals, and cement and plaster are considered as examples.