An empirical analysis on the correlation and impact of equity-based schemes on firm profitability among publicly-listed companies in the Philippines

• Main Authors: Lopido, Kenneth Emerson D., Milanes, John Louis T., Tobillo, Fredrick Vince S., Wu, Joeven S.
• Format: text
• Language: English
• Published: Animo Repository 2014
• Subjects: Stocks; Dividends; Accounting
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/10729
• Institution: De La Salle University

This research paper studied the correlation and impact between equity-based schemes and company performance for the years of 2009 to 2013. Several academic works deduced that companies that declare stock dividends, split their stocks, and grant stock options have experienced permanent growth as regards to company earnings. The occurrence of stock dividends, stock split and share options tend to disseminate favorable information regarding the firm to the market. Knowing how effective such schemes are in boosting company performance, this papers main objective is to find out which among the three equity-based schemes will generate the greatest correlation on company earnings. Publicly-listed corporations around the Philippines was used to verify the existence of correlation between firm performance measured through financial ratios and equity-based scheme and to find out which equity-based scheme is the best predictor. Using panel regression as the statistical tool, the researchers arrived at the following results. A pronouncement of stock split can cause a corresponding positive effect in a companys return on asset and return on equity. A declaration of stock dividend, on the other hand, can result to an improvement in return on equity ratio. Granting of stock options proved to have an insignificant effect with respect to return on assets, return on equity, net profit margin, and basic earnings per share. It can therefore be concluded that the best predictor of company performance among the three equity-based schemes is stock split.