IJSRP, Volume 5, Issue 11, November 2015 Edition [ISSN 2250-3153]
Falak Javed, Faiza Maqbool Shah
The study posits to identify the effect of retained earnings on stock returns of food and personal care good industry listed in Karachi Stock Exchange. The study used three sub variables of stock returns, i.e. capital gain/loss yield, stock prices, cash dividend per share, and identify its relationship with retained earnings. The analysis consists of seven active companies of food and personal care good industry and used the data for a period of 2009-2014. The study used convenience sampling of non- probability method and used linear regression and Spearman’s correlation analysis. The study found a weak and insignificant relationship between retained earnings and cash dividend per share and capital gain/loss yield. The study also found a moderate positive and significant relationship between retained earnings and closing price of stock. The study concluded that the retention of earnings has a weak and insignificant relationship with stock returns. The study suggests that managers should try to pay huge amount of dividends, as retention of earnings do not contribute in enhancing the stock returns.