Project Plan: Financial Performance and Stock Price of a Bank

This project plan examines the impact of a bank's financial performance on its stock price. The assignment begins with an introduction that details the field of research and its significance, emphasizing how earnings per share, return on assets, and other financial metrics influence stock market valuation. It identifies the National Stock Exchange (NSE) as a primary source of secondary data, utilizing market models and Ordinary Least Square (OLS) methods to analyze stock returns and abnormal yields. Research questions focus on the relationship between financial performance and stock price, along with the models used for yield calculation. The plan defines dependent variables, such as stock price, ROA, and ROE, and independent variables, like asset size and capital ratio, to assess their impact during and after financial crises. References to relevant research papers are also included, providing a comprehensive framework for evaluating the financial performance's impact on stock price.

Running head: IMPACT OF FINANCIAL PERFORMANCE ON THE STOCK PRICE
IMPACT OF FINANCIAL PERFORMANCE ON THE STOCK PRICE OF A BANK
Name of the Student
Name of the University
Author note

1IMPACT OF FINANCIAL PERFORMANCE ON THE STOCK PRICE
Table of Contents
Introduction: 2
Discussion: 2
Significance of Research: 2
Source of secondary data: 2
Research questions: 3
Dependent variables: 3
Independent variable: 4
References: 5

2IMPACT OF FINANCIAL PERFORMANCE ON THE STOCK PRICE
Introduction:
The aim of this assignment is to develop the project plan evaluating the Impact of the
financial performance on the stock price of a bank, which is considered to be as the case
study for the common banks or the financial sector in the society. The report delivers the
significance of the field of the research along with the secondary data and the research
question based on the project plan of the bank.
Discussion:
Significance of Research:
The aim of the project plan is to evaluate the impact of financial performance on the
stock price of a bank. The changes in the share market are considered to be directly
influential by the factors of the earning per share and return on assets and the age of the bank.
The significance of the research lies in the matter that directly describes that an increase
determined in the earnings could directly guide to a noticeable appreciation in the share’s
market value or market price.
The report states that, for gaining more share prices the financial performance of the
bank must include the strategies like the critical cost reduction, diversification and aggressive
marketing strategies. This provides improved dividend pay-out which implies according to
the signalling theory that the enhanced dividend indicates the stability of the bank (Terpstra
& Verbeeten, 2014).
Source of secondary data:
The source of secondary data for the stock price of a bank that has been impacted by
the financial performance of the bank has mostly been achieved from the data provided by
the National Stock Exchange (NSE) relating to the announcement regarding the quarterly

3IMPACT OF FINANCIAL PERFORMANCE ON THE STOCK PRICE
financial performance, daily prices of the shares in the market and daily traded volumes
(Jothimani, Shankar & Yadav, 2016).
The market model was utilized to calculate anomalous yields, due to its capacity to
distinguish between two types of occurrences influencing yields, such as the market motion
that impacts the cost of shares and the specific event reflected in the abnormal return. The
Ordinary Least Square (OLS) method was used to produce the expected return on the market
model (Kilmer & Rodríguez, 2017). The daily return on shares for each enterprise on the
sample around their financial statements was regressed toward daily market return, as
determined by the corresponding calendar day's market index. The abnormal yield is the
proportion below or above the anticipated shift in share price. The investigator averaged the
abnormal yields for all observations using the following equation to enhance the information
efficiency of the evaluation of abnormal yields.
Research questions:
• How financial performance does help in gaining better stock price of a bank?
• What are the changes that are affected by the maintenance of financial performance
for making better stock price in the bank?
• What is the model that is used for calculating the yields due to the financial
performance on the revenue and stock price on the bank?
Dependent variables:
It can be clearly stated that the dependent variables consists of the stock price factors
of the banks that are dependent on the financial performance of the bank. The Multiple
Regression model helps in determining the differences between the dependent and
independent variables.

4IMPACT OF FINANCIAL PERFORMANCE ON THE STOCK PRICE
In this document, bank employs two dependent variables, ROA and ROE, in order to
assess bank’s capacity to produce profit. ROA shows how profitable its assets are being
provided to a bank (Alshatti, 2015). It provides an idea for investors and managers how
effective a bank's management is in generating returns using its assets. ROE 17 quantifies
how much a bank could benefit from the cash invested by its investors.
Independent variable:
The following variables are selected as autonomous: asset size, capital ratio, net loans,
deposits, asset diversity and cost-revenue ratio. In the three phases before the crisis, during
the crisis and following the crisis, the bank checks the impact of those factors on ROE.
The bank took the natural logarithm of the complete asset to decrease the
heteroscedasticity in thousands of dollars for asset size. They use the equity or total asset
ratios as a metric for Capital Ratio. The bank expects a good connection between the assets
and the profitability of our banks following our second assumption.

5IMPACT OF FINANCIAL PERFORMANCE ON THE STOCK PRICE
References:
Alshatti, A. S. (2015). The effect of the liquidity management on profitability in the
Jordanian commercial banks. International Journal of Business and
Management, 10(1), 62.
Jothimani, D., Shankar, R., & Yadav, S. S. (2016). Discrete wavelet transform-based
prediction of stock index: a study on National Stock Exchange Fifty index. arXiv
preprint arXiv:1605.07278.
Kilmer, J. T., & Rodríguez, R. L. (2017). Ordinary least squares regression is indicated for
studies of allometry. Journal of evolutionary biology, 30(1), 4-12.
Terpstra, M., & Verbeeten, F. H. (2014). Customer satisfaction: Cost driver or value driver?
Empirical evidence from the financial services industry. European Management
Journal, 32(3), 499-508.