Ratio of Book Value to Stock Market Value and Stock Returns of Food Industry Companies

Abstract

This study examines the relationship between the ratio of book value to market value and the stock returns of food industry companies listed in Tehran Stock Exchange. With regard to the fact that stock returns is one of the most important evaluation measures to shareholders, if this relationship is approved, we can use the ratio of book value to stock market value as criteria for evaluating the return or to predict the return of the company. In the present study, active food industry companies in Tehran Stock Exchange since 2008 to 2011 (four years) have been studied. The relationships were obtained through the financial statements and other reports of above mentioned companies and after sorting were analyzed to test the hypotheses. Descriptive statistics were used to provide indexes and inferential statistics as well as regression models were used to test the hypotheses. These results indicate that there is a positive and significant relationship between the ratio of book value to market value and the stock returns.