Analysis of factors related to future earnings changes in capital market

Abstract

The purpose of this study is to review the relationship between changes in dividends, earnings per share and changes in earnings per share with changes in future earnings. The sample included 100 active companies in Tehran Stock Exchange during the financial years 2005 to 2010. To clarify the relationship, 12 hypotheses have been established and to examine them, the tests of correlation and regression were used. Hypothesis were established based on correlations relation among changes in dividends, earnings per share and changes in earnings per share with changes in future earnings for companies able to predict cash flow ,different market value to book value ratio and equity rerun. The results show strong relationship (correlations) among changes in dividends, earning per share and changes in earnings per share for companies with higher market to book value ratio , higher equity return and lower cash flow predictability. Among main variables, earnings per share and among virtual variables, market value to book value had better effect on changes in future earnings. The correlation coefficient (R) of 0.490 for three main variables has changed to 0.621 for both main and virtual variables. © EuroJournals Publishing, Inc. 2011.