Determinants of the Price Earnings Ratio in the Manufacturing Industries in Jordan

Ahmad A. Fesokh, Fayez S. Haddad

Abstract


This study aimed to investigate the factors that explain the behavior of the Price/Earnings Ratio, whereas the study’s main purpose is to establish a relationship between the Price/Earnings ratio and the factors that determine it. The study collected the financial data for the period 2000 – 2013 from the Amman Stock Exchange for the companies in the Jordanian Manufacturing Sector. The results (OLS regression) showed that Tobin’s Q, Dividend Growth, Leverage and Size had the most significant effect on the Price/Earnings ratio where Tobin’s Q and Leverage had a positive effect indicating that the investor’s confidence increases with higher firm market value and higher firm debt dependency. However, Size and Dividend Growth had significant but negative relationship with the Price/Earnings Ratio.

Keywords


Price\Earnings Ratio, Tobin’s Q, Leverage, Dividend Growth, Jordan, Firm Size

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