An empirical study on the determinants of price-earnings ratio: Norwegian seafood industry

Abstract

This research aims to fill the gap in the existing literature by examining the factors explaining the variations in price-earnings ratio for the Norwegian seafood industry. Employing a Random effects model, we demonstrate that the return on equity is the major determinant of price-earnings ratio. Moreover, the findings suggest that the price-earnings ratio of the Norwegian seafood stocks are positively associated with the excess return, contradicting the widely used Discounted Dividend model. Depreciation of the Norwegian krone against the euro and the US dollar seem to have no significant impact on the price-earnings ratio of the seafood stocks. The evidence derived from this research enhances our understanding about the use of earnings multiplier in the Norwegian seafood industry. The findings give insights to investors and portfolio managers about the outcomes of equity valuation and have implications for decision making and investment strategies.