Evaluating The Relationship Between Financial Ratios and Firm’s Total Stock Returns: A Study of Thai Banking Firms
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Abstract
Financial ratios are the cornerstone of financial statement analysis. Their purpose is to analyze financial statements and evaluate the firm’s performance, solvency, and efficiency. They are beneficial to the stakeholders such as prospective investors, stockholders, lenders, managers, analysts, and government in their decision-making. Total stock returns provide significant information to those who are interested in the financial performance of a firm. Total stock returns include changes in the stock price and dividends paid by the firm. This study explores the relationship between bank-specific financial ratios and the total stock returns of Thai banking firms. Rank normalization method has been used to obtain a ranking of financial ratios. The ranking of banks based on their financial ratios has been compared to and analyzed with the ranking of the banks based on total stock returns. The findings suggest no concrete positive relationship between Thai banks’ financial ratios and their total stock returns. However, financial ratio analysis-based ranking was similar to the total stock returns ranking.
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