A study on the impact of inflation on the performance and profitabilty indicators of publicly-listed companies in the Philippines

• Main Authors: Cereno, Katrina C., Laguatan, Charlemagne Sergie V., See, Carine Valerie C., Cupiado, Janille Yna C.
• Format: text
• Language: English
• Published: Animo Repository 2016
• Subjects: Inflation > Philippines; Stocks > Prices > Philippines
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/7490
• Institution: De La Salle University

The stock market is traditionally regarded as a leading indicator of the economy. Accordingly, macroeconomic factors may have an impact on the stock market. In fact, previous related studies conducted made use of different financial and economic variables to determine the effect of inflation on the stock market. However, these studies showed varying results and were not very conclusive. For this reason, this study aimed to determine how inflation affects the stock prices (performance), earnings per share (profitability) and price-earnings ratio (performance/market value) of publicly listed companies in the Philippines, and to find the relationship between the aforementioned variables. Per-industry analyses for education, mining and oil, retail, and food Industry based on inflation matrix were also conducted which consisted of separate analyses for core inflation and industry-specific inflation. Furthermore, time-period analyses were conducted as well to establish the difference between the short term and long term effects of inflation on stock market. The researchers arrived at different results due to varying data used for each analysis. Using correlation, panel data regression and OLS regression in determining the relationship and impact of inflation on the Philippine stock market, the research revealed significant negative effect and relationship for stock prices. The per-industry analysis using core inflation showed significant negative effects and relationships between inflation and stock prices, earnings per share and price-earnings ratio for the mining and oil Industry and a significant positive effect and relationship between inflation and price/earnings ratio for the retail sector. On the other hand, using industry-specific inflation rate for per industry analysis, the study revealed significant positive results for stock prices of the food industry and significant negative results for the price-earnings ratios of the retail sector. Lastly, for time-period analysis, using time-series econometrics, significant differences using short-term and long-term data were observed for price/earnings ratio.