The Effect of Earning Power on the Fair Value of the Share:An Applied Study of Industrial Companies Listed on the Iraq Stock Exchange (2015–2024)

Abstract

Abstract

This study addresses earning power and its role in achieving the fair value of shares for a sample of industrial sector companies listed on the Iraq Stock Exchange. During the study period, the Iraqi economy experienced unstable economic and financial conditions that directly affected corporate performance and the level of share pricing in the market. These conditions were accompanied by multiple challenges that influenced the efficiency of industrial activity, corporate profitability, and the stability of dividend distributions, which contributed to widening the gap between market value and fair value of shares.

These changes were reflected in companies’ ability to achieve sustainable profits, thereby affecting investors’ expectations, the volume of financing and investment, and consequently the fair value of shares. Accordingly, this study seeks to highlight earning power as an indicator that reflects operational and financial performance efficiency and to clarify its role in explaining changes in the fair value of shares.

The study relied on annual financial data for the sample companies covering the period (2015–2024). Earning power was measured using the earning power model, while the fair value of shares was estimated based on the Dividend Discount Model. The study reached a set of results demonstrating that earning power plays a role in achieving the fair value of shares and concluded with a number of conclusions and recommendations relevant to the study topic.