Does retained earnings of the publicly listed real estate companies in the

Philippines affect its stock returns when profile intervenes?

Years of business existence

Table shows that the profile of the business’ years of existence has no

significance when it comes to the effect of retained earnings to the stock returns of

publicly listed real estate companies in the Philippines. It can be seen from the value of .

114 which is less than the p value of .517 which means that the years of operation of

this publicly listed real estate companies do not matter with regard to retained earnings

and stock returns.

Retained earnings are company’s profit, which left after deducting all expenses

and paying dividends, and it retained in the company for future growth (Dinayak, 2014).

The purpose of retention is that expansion chances of growth increases of retaining the

profit into the company.

Strong (2009) explained stock return as the income attained from a stock security

(Khan, 2013) stated that there are two components of measuring stock performance,

through stock returns, which are dividends and capital gains. (Carson, 2012) explained

that dividend policy are the guiding principles of a company which decide shareholders

part of the company earnings. According to Lincoln (2014), Managers pay dividend

when they have no profitable investment opportunities but it has a negative impact on

share prices of firms. On the other hand, Walter and Gordon support that dividends
are relevant and it has a direct effect on firm value. (Domains, 2007) affirmed that

capital gain/losses are results of share price movements. [ CITATION Fal15 \l 1033 ]

From this, none has stated the significance of years of business existence on

earnings retention as well on stock returns of real estate companies. The researchers

found to have been immaterial to regard this to affect the variables being studied.

Total Assets

Table shows that the profile of the business’ total assets has no significance

when it comes to the effect of retained earnings to the stock returns of publicly listed

real estate companies in the Philippines. It can be seen from the value of .310 which is

less than the p value of .517 which means that the total assets of this publicly listed real

estate companies do not matter with regard to retained earnings and stock returns.

According to [ CITATION Chi18 \l 1033 ] Retained earnings are the portion of a

company's net income that management retains for internal operations instead of

paying it to shareholders in the form of dividends. In short, retained earnings is

the cumulative total of earnings that have yet to be paid to shareholders. These

funds are also held in reserve to reinvest back into the company

through purchases of fixed assets or to pay down debt.

Moreover, Revenue is the total amount of income generated by the sale of

goods or services related to the company's primary operations. Revenue is the

income a company generates before any expenses are taken out. Revenue, or

sometimes referred to as gross sales, affects retained earnings since any

As a result of higher net income, more money is allocated to retained earnings

after any money spent on debt reduction, business investment, or dividends.

Net income will have a direct impact on retained earnings. As a result, any

factors that affect net income, causing an increase or a decrease, will also

ultimately affect retained earnings. However, there is no significant relationship

where retained earnings and stock returns has an effect when the assets of the

company intervenes. Factors that may cause the equity account to increase or

decrease include certain transactions related to the repurchase of company stock, the

declaration of shareholder dividends and the income or loss from operations. [ CITATION

Hel19 \l 1033 ]

Number of employees in the business

Table shows that the profile of the number of employees in the business has no

significance when it comes to the effect of retained earnings to the stock returns of

publicly listed real estate companies in the Philippines. It can be seen from the value of .

447 which is less than the p value of .517 which means that the number of employees

in the business of this publicly listed real estate companies do not matter with regard to

retained earnings and stock returns.

Furthermore, Retained earnings are an important part of any business's financial

picture. Over the course of a year, retained earnings will increase and decrease. These
fluctuations will be due primarily to one of three events in a business's cash flow:

experiencing net gains, having net losses or paying out dividends. All these events will

be documented in a business's accounting statement of retained earnings, which acts

as a helpful indicator of a business's financial health. [ CITATION Jef19 \l 1033 ]

Stocks, also generally known as shares, allow a person own a portion of a public

corporation. The owners sell control of the company to stockholders to gain additional

funds to grow the company. Shares of public companies trade on regulated stock

exchanges, where investors can place buy and sell orders (Basu, 2018). A number of

studies in economics literature have established a positive relationship between

economic growth and stock market development where shares belong. A well organized

and managed stock market arouses investment opportunities in the country by

recognizing and financing productive projects that ultimately lead to economic activity,

allocates capital efficiently, mobilizes domestic savings, helps diversifying risks and

facilitates exchange of goods and services. (Nazir, Nawaz, & Gilani, 2010) Whereas,

portfolio investment from shares of business mans and entrepreneurs results to an

increase in the liquidity of domestic capital markets, brings discipline and know-how into

the domestic capital markets, and facilitates the use of new products and instruments

A factor that can affect stock price are the technical factors such as financial,

environmental and managerial factors. (Sharif, Purohit, & Pillai, 2015) While, market

sentiments are the component of expectations about asset returns that are not

warranted by fundamentals and can affect the movement of stock prices by the

consumer confidence index whereas the consumer confidence decreases, the

profits and stock prices. (Bolaman & Erim Mandaci, 2014)

O'Byrne discussed shareholder value is a constant concern of management and

a key obective of most long-term incentives plans. The stock returns is a measure of

management performance for compensation decisions where high performing level

companies are expected to give a return higher than those of new established

companies.

Number of employees in real estate companies has no clear importance on the

retained earnings and stock returns. From the collected researches, as well as the data

gathered, clearly revealed that it has nothing to with the variables being studied by the

researchers.

Capitalization

Table shows that the profile of the capitalization in the business has no

significance when it comes to the effect of retained earnings to the stock returns of

publicly listed real estate companies in the Philippines. It can be seen from the value of .

373 which is less than the p value of .517 which means that the capitalization in the

business of this publicly listed real estate companies do not matter with regard to

retained earnings and stock returns.

Retained earnings are usually treated as a cumulative number over the life of a

company. In other words, these are profits that have remained undistributed to

shareholders. (Peavler, 2018)

a company. The savings generated internally by a company in the form of retained

earnings are ploughed back into the company for diversification of its business.

Retention of earnings by companies reduces their dependence on funds from external

sources in order to finance their regular business needs.

In order for a company to grow ,develop and expand, retained earnings have to

be used for the accumulation of assets that generate income for the company. When

income is generated it gives a company the means for expansion. . Potential growth

opportunities would place a greater demand on internally generated funds. The

importance attached to corporate income retention in enhancing the growth of firms has

been the driving force for many study (Thirumalaisamy, 2013) which analyses potential

variables that would affect retained earnings and change in retention behavior among

companies differing in their growth levels.

Present, past and future earnings of the company generally guide the

shareholders‟ expectations of dividends and capital gains. The portion of earnings into

dividends, and retained earnings is taken into account by the investors. (Khan, 2009)

However, there is no significant relationship where retained earnings and stock returns

has an effect when the capitalization of the company intervenes. Determinants of stock

returns usually involves inflation, dividend policies and other external factors, while

retained earnings determinants firm characteristics such as firm size, assets tangibility,

profitability, dividend payout, leverage, growth opportunities, and business risk and

managerial discretion have been identified by different researchers as the determinants

of retained earnings.