| According to the contemporary financial management theory, the ultimate goal of listed companies is "the maximization of stockholders' equity". Thus, stock price becomes a very important index to both the BOD and the investors. The BOD regards "stock price" as a key indicator which reflects the operating performance while the investors choose particular stocks according to the analysis of the financial statements. Therefore, certain relations exist between "stock price" and "operating performance". As an important factor which affects stock price, do financial indicators lead the fluctuation of stock price? Are there any significant relations between the two factors? Besides, what's the difference between various financial indicators when used as reference to choose stocks?Under this background, the article intends to answer these questions by studying the correlation between "stock price" and "financial indicators". If there is obvious relation between the two, it proves that the efficiency of China's stock market is relatively high. On the contrary, the unobvious relation can be regarded as low efficiency, which means the fluctuation isn't the direct reflection of the enterprise's performance conditions. Consequently, the article selects four financial indicators which can reflect the performance conditions. They are: EPS, FCF per share, ROE and MOP (main operating profit) . Then we use empirical approach to test the correlation between "stock price" and the four financial indicators.The testing period is from Jan.1, 2005 to Sept.30, 2007 and the sample is 60 listed companies from Shanghai stock exchange, covering various market values. The correlation analysis indicates that in terms of EPS, the enterprises with large& medium-sized market value show certain relations between this indicator and stock price, while those with small market value don't. However, in terms of the other three indicators, that is, ROE, MOP and FCF per share, there is no obvious relation between them and stock price. The study result reflects that China's stock market is by no means mature. Consequently, we can conclude that the efficiency of our stock market should be further improved. Besides, choosing stocks by using the indicator "EPS" is to some extent reasonable in reality.The advantage of this study is to divide the stocks listed in Shanghai Stock Exchange into different categories, which ensures that the result can give a comprehensive explanation according to different market values. In addition, the study puts emphasis on the comparison and analysis of various financial indicators instead of directly using the conclusion and models. The author not only states the reason why she selects the four indicators, but also combines them with stock price. To sum up, the article conducts the survey from two perspectives, that is, stock price and financial indicators and analyzing the efficiency of our stock market with the latest financial figures.This article can be divided into several parts as follows: the first chapter is about the background, approach and framework of the study. Also, a lot of similar studies from both home and abroad are introduced in this part. The second chapter illustrates the theoretical basis of selecting the four financial indicators and analyzing the function and calculation of them. The third chapter is the most important part of the article, which conducts the empirical study of the correlation analysis between financial indicators and stock price. The last chapter forms a conclusion based on the empirical study and gives some suggestions in political terms. |
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