Impact of Financial Performance on the Stock Price of a Bank: A Case Study of National Australia Bank

Running Head: ASSIGNMENT 2
Impact of Financial Performance on the Stock Price of a Bank: A Case Study of National
Australia Bank
Student’s Name:
Teacher’s Name:
University:
Date:

2
ASSIGNMENT 2
Executive Summary
The following report takes into account the varied and robust relationship of the financial
performance and the banks stock price, in respect of the case study of National Australia Bank.
The aim that has been determined to examine the connection between the variables which are
independent and dependent in nature, which that are interrelated with each other. The research
question intends to understand the effective relationship among two variable and factors that
influence the stock price. It was determined from the analysis and discussion that there is a
constructive relationship amongst the stock price and financial performance of National
Australia Bank.

3
ASSIGNMENT 2
Table of Contents
1.0 Introduction................................................................................................................................5
1.1 Background............................................................................................................................5
1.2 Rationale................................................................................................................................5
1.3 Aim and Research Question..................................................................................................5
2.0 Literature Review......................................................................................................................7
2.1 Theoretical Review................................................................................................................7
2.1.1 The Financial Performance and the Stock Price Movement..........................................7
2.1.2 The Factors of Financial Performance and Stock Price..................................................8
2.2 Conceptual Framework........................................................................................................11
3.0 Research Method.....................................................................................................................13
3.1 Research Data Collection Method.......................................................................................13
3.2 Data Analysis Method.........................................................................................................14
4.0 Finding and Analysis...............................................................................................................15
5.0 Discussion................................................................................................................................19
5.1 The Relation between the Financial Performance and the Stock Price...............................19
5.2 The Relationship between the Factor of Financial Performance and the Stock Price.........19
6.0 Conclusion...............................................................................................................................21
7.0 References................................................................................................................................22

4
ASSIGNMENT 2
Table of Figure
Figure. 1: Conceptual Framework.................................................................................................12
Figure. 2: Stock Price Relation with Liquidity..............................................................................15
Figure. 3: Stock Price Relation with Net Profit.............................................................................16
Figure. 4: Stock Price Relation with Market Valuation................................................................17
Figure. 5: Stock Price Relation with Growth.................................................................................18

5
ASSIGNMENT 2
1.0 Introduction
1.1 Background
A company is able to significantly improve its competitiveness and performance with a
strong and effective financial background. There are various factors that has a relation with the
growth of a company relatively in a financial prospect, but the most duly noted factor is the
relation between the financial performance of the company and the stock price. A company tends
to see an overall rise in the stock price when there is a relatively good performance (Anwaar,
2016). They both are considered as the most relative variable, where the stock price is considered
as the variable which is dependent and the financial performance is considered as the variable of
independent nature.
1.2 Rationale
The stock price relatively moves in the same direction as the performance of financial
aspect of the company. The market demand drastically changes with the general financial
performance. Relative increase in financial performance will increase the market demand and the
stock price will increase relatively. The financial performance relies on many aspects such as the
liquidity, inflow and outflow of cash and profitability (Bahmani-Oskooee & Saha, 2015). A fall
in profit will drastically impact the financial performance and the market will react negatively,
which will lead to a fall in the share price. A company always intends to improve its performance
as it will help in securing better relation with the stakeholders.
1.3 Aim and Research Question
This study intends to set an aim to determine the relationship between financial
performance and stock price, taking into consideration of a case study of National Australia

6
ASSIGNMENT 2
Bank. In respect of the aim that has been set, two research question has been duly set, which are
to be achieved in this study.
Research Question No. 1: What is the relation between financial performance and stock price?
Research Question No. 2: What is the relationship between factor of financial performance and
the stock price?