An Empirical Study on the Impact of Financial Metrics on Stock Prices in China

Abstract

Research Purpose: The objective of this study is to investigate the relationship between stock prices and financial metrics in China, specifically examining the impact of two main financial Metrics: price-earnings ratio (PE), price-book ratio (PB) on stock prices in China. Research Methods: This study utilizes cross-sectional data from 200 listed Chinese A-share companies as of December 31, 2022. The data were examined using multiple linear regression methods. Key financial metrics analyzed include the price-earnings ratio (PE) and the price-book ratio (PB). Additionally, the study incorporates three control variables: the company's asset size (Size), leverage (Lv) and company growth rate (Growth). Results in Research: The results indicated that the regression analysis reveals that the price-book ratio (PB) and company’s size (Size) are positively(+) correlated with stock prices, while leverage (Lv) were negatively(-) correlated with stock prices. Research Conclusion: In the China's stock market, there was a correlation between Price-Book Ratio (PB), company size (Size), and leverage (Lv) with stock prices. These findings provide important references for international investors interested in the China's stock market and offer insights for other global markets.