The Relationship Between Earnings and Share Prices at NSE

This research report investigates the relationship between earnings per share (EPS) and market share prices of companies listed on the Nairobi Securities Exchange (NSE). The study examines a sample of 40 companies from diverse sectors, analyzing market variables such as EPS, dividend per share (DPS), price-to-earnings (P/E) ratio, price-to-book value (PBV), and dividend payout ratio (POR). The research employs a cross-sectional correlation method and multiple linear regression analysis to identify the influence of these factors on share prices. The introduction covers the background of the study, earnings of the company, determination of share price, the relationship between earnings and share price, the Nairobi Securities Exchange (NSE), research problem, research questions, and research objectives. The literature review explores theoretical frameworks like the Efficient Market Hypothesis, Three Links Theory, Signalling Hypothesis, and Earnings Multiplier Model, along with factors affecting share prices and empirical research findings. The methodology section details the research design, population, sampling method, data collection, and analysis techniques, including key variable evaluations like EPS, share price, DPS, P/E ratio, POR, and PBV. The data analysis chapter presents regression coefficients, significance tests, and ANOVA results, followed by a discussion of the findings. The conclusion summarizes the key findings and offers recommendations based on the research outcomes.