Are Stock Returns Indicative of Company Financial Performance? : A Case Study of Listed Banks on the Ghana Stock Exchange

Abstract

The aim of the research is to assess the veracity of the assertion that stock returns are indicative of the financial performance of companies listed on Ghana stock exchange. Stock returns is the dependent variable, and Capital Adequacy Ratio, Asset Quality, Net Interest Margin, Earnings Per Share, Liquidity and Return on Assets are the independent variables. The financial statements of four listed banks from 2009 to 2018 were analysed. The purposive sampling technique was employed. Using SPSS version 21, multiple linear regression was run at 0.05 significance level. The hypotheses that liquidity, Asset Quality, Net Interest Margin, Return on Assets and Capital Adequacy Ratio have effect on the stock returns were rejected, leading to the assertion that stock analysts, portfolio managers and savvy investors should not rely on the above ratios in assessing the performance of the stock returns of listed banks in Ghana.